Consider Debt Consolidation to Improve Your Credit
Even though you may have a bad credit history, debt consolidation may be a way for you to take charge of and improve your credit. For most people, being in debt is just a fact, but it does not have to be a bad thing. How well you are managing your debt will determine if you need to apply for a debt consolidation loan. If you have more bills to pay per month than money coming in then you are heading toward a bad credit rating. A debt consolidation loan may be the answer.
Before applying for a debt consolidation loan, you will need to figure out how much you owe. Begin by writing down a list of all creditors and how much you owe. In addition, include the monthly payment due for each creditor. By assessing your debts you can determine how much of a loan payment you can afford if you choose to consolidate. Consolidating your debts is one of the best ways of eliminating your debt. However, for those not familiar, this method may extend the payment period or even increase the interest rates.
Loans
If you are going to consolidate all of your outstanding loans and credit cards, then you should be able to qualify for consolidation. If you own your own house, you can consider an equity loan. An equity is the difference between what you owe on your mortgage and the current value of your home. You can take an equity loan for many purposes and one common use is to pay off debt that has a higher internet rate.
You can also look at getting an unsecured loan. This can consolidate your debts into a single low monthly payment without using your assets as collateral. These may be harder to get if your credit is already poor, however.
Credit Counseling
Many companies specialize in managing all your debts without getting another loan. For a small monthly fee, they will negotiate with your creditors to have your interest rates lowered. They will also take care of the payments you make every month. These types of business are called credit counselors. To avoid scams, look for one affiliated with the Consumer Credit Counseling Services of America. These companies have many methods to work out a plan for you. You will be able to reduce your debt and eventually improve your credit ratings.
Take the time to check out any debt consolidation company. Ensure that the company you are dealing with is perfectly legitimate and have a very good reputation before agreeing to avail of their services. Use the internet and check out the companies you are considering if they are reputable and in good standing.
Look at the Big Picture
Whether you consolidate your credit card debt or not, you need to make a schedule of all your expenses for the month and analyze your spending. This will give you a better idea of where all your money goes. You may be unaware that you are already spending so much on unnecessary items and end up using your credit card to cover for other expenses. You should match your expenses with what you are earning, striking a balance will greatly help in managing your debt.
Having all your debts consolidated may give you relief and some money left over at the end of the month. Consolidating your debts will eventually lead to you having no debts at all and a better credit record. Once you have consolidated your debt into one payment, put your credit cards away, and do not take on any more credit. Remember, the purpose of consolidating was to reduce your debt in the end and improve your credit ratings.