Highlighting Options for Debt Consolidation

Debt consolidation means a borrower takes out a new loan to repay many others, hoping that the new loan offers more attractive terms and conditions than those indicated in the current debt agreements. If you are struggling to repay your existing obligations, or you think your current debt load is gradually pushing you toward bankruptcy, seek the help of professionals or try to renegotiate terms with existing lenders.

Debt Management

Debt consolidation is part of debt management, the series of steps and procedures a borrower takes to determine how much he or she owes, how to reduce the staggering interest expense attached to the debts, and how to find a way to curb the debt load over time. The end goal here is to avert financial catastrophe, the kind that arises in cases of personal default, outright bankruptcy or gradual financial tumult. A debt, also known as a liability or obligation, is cash a borrower must repay to the person or institution that advanced the funds in the first place. Examples include the tapped portion of a credit card, a mortgage, a student loan and a car loan, as well as the miscellany of debts a person takes out to live, create a business, and take that long-awaited trip to the Bahamas, for example.

Negotiate with Existing Lenders

The first step in debt consolidation is renegotiating the applicable terms and conditions with existing lenders. If you are a borrower on the brink of personal insolvency, contact your existing borrowers and determine whether there is a possibility to renegotiate your existing debt agreement. Depending on your personal situation and credit profile as well as the policies and procedures followed by the lending institution, there might be an opportunity to restructure a specific debt – and give you that much-needed sigh of relief. To build a good case, do your homework. Determine why you fell behind in payments in the first place. If the default stemmed from a job loss, for example, and you are now fully employed, you could have the chance to press a good case with the lender. Show the creditor your pay stubs and an employment verification letter. You also can prepare a profit-and-loss statement indicating your total expenses and income level at the end of a specific period – say a month or every two weeks.

Contact a Debt Consolidation Advice Agency

Seek the expertise of a debt consolidation agency if negotiations with your existing lenders are unsuccessful. Some agencies are nonprofits, whereas others operate with a profit motive and may charge for their services. You can find out more about debt consolidation options at www.ConsolidatedCredit.co.uk.

Irrespective of the agency’s legal status, you can receive good advice on debt management and consolidation from debt consolidation advisers that it employs. Contact your local financial services roundtable or the department of financial services in the state where you live. Public officials will give you a list of debt consolidation agencies operating in your area, as well as the terms and conditions these institutions typically make borrowers sign. ( I would remove all this as it isn’t relevant due to the differences in countries, also as a rule we don’t want to refer people to local CAB’s or One Stop shops they have here. By protocol we need to make them aware of MAS/Money Advice Service, so no need to go down this path again here.)

Take out a New Loan

Taking out a new loan to consolidate existing debts could be economically wise, assuming your credit history has not suffered much from your recent financial history and a bank is willing to consider your loan application. Start by reaching out to the bank where you currently have checking and savings accounts, but no outstanding loans. Despite your relatively tarnished credit profile, the bank might give you a second chance if it sees, for example, that your income level is high enough to cover monthly debt payments and that the conditions that pushed you into debt in the first place are no longer present. If your application is successful, the bank may pay the other lenders directly or send you a check and instruct you to remit the funds to the respective creditors.

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