How to Determine the Right Debt Consolidation Service for You

The right debt consolidation service for you depends on the reason why you are seeking consolidation. If you are in need of the assistance because you cannot handle your current debts financially, then you should consider a service offering settlement and credit management options. If you are looking to consolidate in order to pay off loans quicker and turn over your debt immediately, then you should consider the options giving you the fastest route to financial freedom.

Debt Consolidation for At-Risk Borrowers

Those borrowers at risk of loan default or even bankruptcy should look to settle their current debts for as low as possible and elect credit management help for the future. Some consolidation companies will have a record of success settling debt. You should look for those that have worked with your specific lender in the past and ask about the average settlement they achieve. When you consolidate, you will then pay off your existing debts at a much lower sum than you currently owe. As such, your consolidation low can be smaller and more affordable. You should also speak with the consolidation company about their assistance for your future. Some companies will offer expansive credit assistance, helping you file disputes and recover your credit quickly. Others are more turn-key with the consolidation process. They will move you through consolidation faster and offer little in continuing services to you.

Debt Consolidation to Expedite Loan Payoffs

Consolidation is an option even if all of your loans are in good standing and your income is high. In this case, you may want to consolidate in order to expedite the payoff of your current loans and prepare for a future financial move. This is often used as a strategy to dump student and personal debts before applying for a mortgage. In this case, you should look for the consolidation company that offers you the shortest options for paying off your debts at a reasonable interest rate. If you are willing to incur high monthly payments, you may find your consolidation company can offer you an extremely competitive interest rate; in fact, this rate should be much more competitive than those on your current outstanding loans. Taking the biggest monthly payment possible will save you the most in the long-run.

Drawbacks of Debt Consolidation

No consolidation discussion is complete without considering the drawbacks of opting for this debt management tool. First, there will always be a negative impact on your credit when you consolidate. This occurs because you are modifying several loan contracts at once. The only exceptions are some federal loan consolidation options on current federal debt. Aside from credit impact, you should also be aware there will be prepayment fees on your current loans. If you are working with the right consolidation company, you can perhaps get these fees removed in exchange for the lump sum payoff. Finally, you should consider the impact of aggregated risk with your new loan. If you default on a consolidated loan, then all of the previous debts will go into default at once, placing the whole of your collateral and credit score in jeopardy.

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