If you have multiple unsecured obligations and having difficulties paying the monthly amortizations on time, you will be compounding your dilemma if you will obtain additional loans just to pay them off. You can find a second job or do some overtime work to sustain the payments, but that is actually difficult to achieve for many people in such a situation. However, there are various financial solutions offered by financial companies to help people in extreme financial difficulties. One of these financial options is debt consolidation. This option is recommended for people who want to make good on their credit reputation and make lower monthly payments to cope with their financial dilemma.
Debt Consolidation Loans
Debt consolidation loan is one of the three categories of debt consolidation. This scheme lets you make payments to one creditor instead of several lenders. This financial option is further sub-categorized, which includes balance transfers on credit cards with zero-interest, home equity loans, personal loans and car equity loans. This is perhaps the most prevalent method of packaging all your debts into one single obligation, for easier monitoring of your finances. Just imagine having to remember those numerous monthly due dates! You will likely forget one or two due dates, thus subjecting you to penalties and surcharges.
By having to pay only one single debt through a debt consolidation loan, you eliminate the hassles that come with having to settle multiple obligations. Nevertheless, it has its drawbacks – you could be confronted with an extended period of repayment which could mean that you will not be able to pay off all your debts within the original term. However, when done appropriately, this financial option will give you the opportunity to pay lower interest rates, lower monthly amortizations, enhance or protect your credit score and reduce your financial stress, in general.
Debt Management Plans
With Debt management plans, you actually pay a company who will take charge in paying off your various creditors, after taking some fees from your payment of course. In return, such company will help you obtain a lower interest rate from your various creditors and even lessen or waive fees for late payments. They will also provide you sessions for financial counseling to help you determine how much you can afford to pay your lenders every month. By opting for this financial solution, your credit score might be adversely affected, although after 3 to 5 years, with regular payments to the debt management plan company you have chosen, you will be able to pay off all your debts, thus improving your credit score.