How to Choose a Debt Consolidation Company and Get Rid of Debt Fast

How to Choose a Debt Consolidation Company and Get Rid of Debt Fast

If you’re struggling with debt, then this can impact on every single aspect of your life. It’s a constant source of stress that actually makes it much harder to make smart financial decisions going forward. No one will offer you any good rates for loans, and any money you attempt to save will go straight toward paying off bills. Debt consolidation has an answer though, and it’s the first step many people will take to getting out of this seemingly bottomless hole. But only if you choose the right company to help you!

So just what is debt consolidation? Essentially, debt consolidation takes all of the outstanding debts you currently have and then combines them into a single loan with easy monthly repayments1. This doesn’t make your debt magically go away, but what it does is to simplify matters significantly and potentially save you lots of money.

The way it does all this is by taking a single bigger loan and using that to pay off all the outstanding debts that you currently have. Now all you need to do is to pay back that one big loan, and you’ll be completely debt free! This can either happen manually (meaning that you take out a loan and then individually use the money to pay off the other loans) or automatically (meaning that a company handles all of your debt for you and you just pay them). The latter is preferable as it ensures everything will go as smoothly as possible without requiring any extra work from you.

Choosing the right debt consolidation agency is key to getting this right and reaping the benefits, so keep reading to learn everything you need to know.

How Debt Consolidation Simplifies Matters

If you have 20 different loans that all need paying off, then this can become something of a nightmare just to manage. You need to remember each repayment schedule, and you need to ensure that you’re not going to accidentally miss one. You need to ensure that you have enough money in each account, and you need to keep a look out for better deals or opportunities to switch.

It’s a lot of balls to keep in the air, and for many of us it’s only a matter of time before it all comes crashing down and we’re left to pay some serious fees.

With debt consolidation, you’ll only need to worry about one monthly repayment that you will agree with the lender. This also makes a lot of other things much easier: such as debt restructuring. If you need to change the rate at which you are paying back your loans, then you can do so by speaking with just one company – instead of lots! The psychological effect of having just one loan to pay back cannot be overstated.

How Debt Consolidation Saves You Money

Aside from helping you to avoid fees and similar issues, debt consolidation can also save you money by letting you transfer to a loan with better terms. The aim will often be to switch to a single loan that has a much better interest rate than what you’re currently being offered. This is a feature of many debt consolidation companies, so it’s not unusual to find it.

Likewise, if you time your change wisely, you can use this as a great way to save even more money. For example, if the national interest rates are low, then this is a great opportunity to use debt consolidation.

Likewise, if you have recently improved your own credit score, then you might get offered better rates from a debt consolidation company.

This also lets you renegotiate the rate at which you are paying back the loan and how much you want to pay back each month. This can save you a huge amount of money over time.

How Debt Consolidation Improves Your Credit Score

Debt consolidation can even improve your credit score. It does this by paying off your outstanding debts, which is precisely what banks want to see. Banks and lenders don’t care how you pay off loans, only that you do pay off loans. No matter what method you use, if you suddenly settle a whole number of different outstanding debts, then you will become far more appealing to lenders again.

How to Choose the Best Debt Consolidation Company

When choosing a debt consolidation company, there are a few obvious things to consider:

  • Will the company handle the transfer of debts for you, or do you need to do this manually?
  • What interest rates does the company offer? When you add up all the interest of the loans you are currently paying, does this lower the total amount of interest you’ll pay back? It’s worth calculating this in a spreadsheet: there is no point switching to a loan consolidation loan if you are going to end up paying more!
    • Keep in mind that different lenders may be suited to different people. For instance, if you have bad credit (which is likely), you may benefit from a bad credit loan. These often ask for collateral in the form of property (called a secured loan) or a guarantor (guarantor loan). Some companies specialize in these kinds of loans and thus can offer better rates for people who are struggling. It’s up to you whether to consider a loan that may put your property at risk.
  • How flexible is the company when it comes to repayment schedule? Do you want to pay the loan off quickly with large sums? Or do you want to pay it back slowly with smaller repayment? Find the company that will offer you the type of loan repayment structure that suits you.
  • Are there any incentives? For example, some companies will offer 0% APR for the first year.

In other words, don’t just take the first loan that you find. Look around and you may be able to get a loan consolidation that transforms your debt nightmare into a simple process of making small repayments each month.

  1. Debt consolidation loans – Money Advice Service