Consolidating Your Debt
The process of debt consolidation involves taking out one loan to pay off a number of other loans already in existence. Going through this process can be very helpful to many people in debt because consolidating a group of loans into only one often secures a lower or fixed interest rate. It also makes repayment much simpler by reducing loan bills to only one per month. Debt consolidation is most often advised for those dealing with large amounts of credit card debt, as credit cards typically have much higher interest rates than loans.
In most cases, debt consolidation is accomplished by getting a secured loan against an asset that then serves as collateral such as a house. Tying the loan to collateral ensures a lower interest rate because the owner agrees to allow foreclosure of the asset (if need be) to payback the loan. With the reduced risk to the lender, the lower interest rate is obtained.
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Concerns Regarding Debt Consolidation
Here are a few big concerns to be aware of with the debt consolidation process. Worries stem from people wanting to consolidate unsecured debt into secured debt against collateral like a home. In these circumstances, the total amount being repaid over time ends up being significantly higher than the original sum, even though the interest rate may be lower than before. Because of this, critics of debt consolidation argue that the process only treats the symptoms of high debt and does not cure the underlying problems that started it.
There have also been major issues regarding debt consolidation companies taking advantage of consumers. Some companies will charge exorbitant fees to customers desperate to consolidate because, if they do not refinance immediately, they will be at risk of losing their homes. Another dangerous practice, known as predatory lending, occurs when a client goes in to consolidate but is not aware of other lenders with lower fees or what the industry standards are in terms of consolidation. It is important to be on the lookout for practices such as these if you’re thinking about consolidating your debt.
Another concern in debt consolidation is high monthly fees. Generally, depending on the number of creditors you have, your monthly fee should be no more than $2 to $5 per creditor and not above $50 total (approximately). Agencies usually charge these nominal fees to cover administrative and other related costs. Also, make sure the agency you use does not charge any extra fees like maintenance costs, which can often come in addition to the monthly charge.
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Advantages of Debt Consolidation
There are two major advantages to consider when deciding whether or not to consolidate your debt. First, it will be easier to get an accurate view of your monthly finances when you consolidate because you will only be receiving one bill for your total debt. A debt consolidation loan may also enable you to extend the term of repayment for the loan, allowing you to reduce the amount of your monthly payments. And with the lower interest rate associated with the consolidation, you will have lower long-term interest costs over time.
A second advantage of debt consolidation is its tax deductibility. With a first or second mortgage as a debt consolidation loan, the interest incurred on that is tax-deductible. With regards to credit scores, debt consolidation loans will not raise or lower credit scores significantly in the short term. In the long term, however, it will work to increase your score when you make payments consistently for a few years. Credit agencies will take note that your accounts are being paid off.
Debt consolidation companies by state:
Alabama: Alabama Central Credit Union, (205) 941-1010
Alaska: Colonial Home Loans, (907) 569-5363
Arizona: Credit Data Southwest Inc., (602) 528-7785
Arkansas: Citizens First Home Mortgage, (870) 335-2600
California: California Consumer Credit, (323) 667-9999
Colorado: Franklin Foundation, (303) 403-1100
Connecticut: Absolute Mortgage Solutions, (860) 953-5723
Delaware: Schwab Group, (302) 533-6450
District of Colombia: Barber & Associates, (202) 479-0325
Florida: American Credit Counseling Service, (813) 985-4770
Georgia: Antwine & Associates, (404) 297-4824
Hawaii: Premiere Mortgage, (808) 874-8800
Idaho: Rocky Mountain Mortgage, (208) 331-1500
Illinois: AAA Cook County Consolidation, (847) 933-8800
Indiana: Accutrac Inc., (765) 608-5050
Iowa: First Rate Mortgage, (515) 965-5757
Kansas: AIH Receivables Management, (913) 535-1000
Kentucky: CBHC Inc., (270) 737-3366
Louisiana: City Mortgage, LLC, (225) 292-7053
Maine: Seafax Inc., (207) 773-3533
Maryland: Citi Mortgage, (410) 431-7172
Massachusetts: Summit Mortgage, (888) 859-0900
Michigan: Greenpath Debt Solution, (248) 332-5273
Minnesota: ND Consultants, (763) 422-9513
Mississippi: A Quality Home Mortgage Inc., (601) 373-8889
Missouri: Bell Financial Group Inc., (417) 890-1515
Montana: Acranet Cars Branch, (406) 252-6371
Nebraska: Eagle Mortgage Inc., (402) 397-7180
Nevada: Superior Debt Service, (702) 256-1025
New Hampshire: A American Debt Consolidation, (603) 628-1990
New Jersey: Credit Alternative, (973) 509-1903
New Mexico: Gordon Financial Service, (505) 883-3900
New York: Debt Settlement Limited, (518) 238-0390
North Carolina: Alliance Credit Counseling, (866) 655-7107
North Dakota: Quest, (701) 235-0087
Ohio: A B Mortgage Group, (614) 848-5410
Oklahoma: Credit Bureau of Chickasha Inc., (405) 224-0373
Oregon: Blue Sky Mortgage Inc., (541) 504-4551
Pennsylvania: Park International Inc., (724) 512-0110
Rhode Island: Statewide Commercial and Home Loans, (215) 245-2233
South Carolina: CBR Systems, (843) 921-9173
South Dakota: Empire Mortgage, (605) 335-1996
Tennessee: Accurate Financial Service, (615) 826-7123
Texas: Allied National, (214) 575-7477
Utah: Eagle Financial Resources, LLC, (801) 763-9660
Vermont: Onesource Funding, (802) 280-2240
Virginia: Ortega & Associates, (703) 998-0760
Washington: Trans Union Corporation, (425) 454-1909
West Virginia: Carteret Mortgage Corporation, (206) 284-7020
Wisconsin: ABC Budget Service, (262) 790-0100
Wyoming: Mortgage Source Inc., (307) 755-1592