If you are in debt, it probably feels like there is no way out. Though your situation may be overwhelming and increasingly stressful, there is no reason it has to keep getting worse. Have you ever considered debt consolidation? There are actually many viable options available to you to help improve your financial situation and start you on the road to debt consolidation.
The free debt consolidation solution best suited to your particular situation will vary depending on how much you owe, how disciplined you are, and what your future options include. Consider the following, and remember to do your homework before starting down the road to debt consolidation.
Develop a Budget
Before you can take action toward debt consolidation, you must assess how much money you bring in versus how much money you spend. First, determine the total amount you take, and then list your usual monthly expenses like mortgage payments or rent, car payments, insurance, etc. Once you have competed this, you can move onto the more difficult step of listing your variable expenses -- like entertainment, recreation, and clothing. Having a written list of all your expenses can help you identify your spending patterns and make debt consolidation much more realistic.
Contact Your Creditors for Free Debt Consolidation
Once you have a more structured budget in place, contact your creditors and explain why you are having monetary problems. You can then work together to create a modified payment plan that is more manageable for you. This is a crucial step on the road to debt consolidation. If you ignore your creditors, your accounts will be passed on to a debt collector.
If you are already being contacted by debt collectors, there are a few key things you should know. According to the Fair Debt Collection Practices Act, a debt collector may not call you before 8 a.m., after 9 p.m., or while you're at work if the collector knows that your employer doesn't approve of the calls. Collectors are not permitted to harass you or lie, and they must honor a written request from you to cease contact.
Car and Home Loans
Before you can understand free debt consolidation, you should know that there are two kinds of debt: unsecured or secured. While unsecured debts -- like credit card debts, signature loans, and debts for services -- are not tied to any asset, secured debts may tie your car to your car loan or your house to your mortgage. If fail to make your payments, your car faces repossession and your house could be foreclosed.
Most automobile financing agreements allow a creditor to repossess your car any time you're in default without any notice. To get your car back, you may have to pay the balance due on the loan plus towing and storage costs. If you fail to do this, the creditor can sell the car. If, on your path to debt consolidation, you know you are unable to make your car payments, you might be better off selling the car to pay off your debt and avoid repossession expenses and a blemish on your credit report.
As for your debt consolidation and your mortgage, contact your lender immediately to avoid foreclosure if you find yourself falling behind on payments. Most lenders will work with you if you seem honest and the situation is temporary. Some lenders may even temporarily cut or suspend your payments, but you may have to pay extra towards your past due total when you resume regular payments. Another viable option is to have your lender alter your mortgage by extending the repayment period. Be sure to ask whether there are added fees for these changes, and, if so, figure out how much they will add up to in the long run so that it doesn't negatively affect your debt consolidation.
Credit Counseling for Free Debt Consolidation
If you have already unsuccessfully aimed for debt consolidation through all of the methods above, consider contacting a credit counseling organization to fix your financial troubles. Reputable credit advisors are certified and trained in the areas of consumer credit, money and debt management, and budgeting and can help you develop a personalized plan for debt consolidation. Though many credit counseling organizations are nonprofit, their services may not be free, cheap, or even legitimate, so do your research. Avoid organizations that try to pressure you into making "voluntary contributions," won't send you free information about their debt consolidation services, or charge high up-front or monthly fees.
Debt Management and Free Debt Consolidation
Obtaining a second mortgage or a home equity line of credit may be attractive debt consolidation options as well. These loans can help lower your cost of credit and might result in unique tax advantages. However, they require you to put up your home as collateral, so you risk losing your home if you make late payments or fail to make them at all. Furthermore, not only do you have to pay interest on these loans, but you might have to pay "points." One point is equivalent to one percent of your borrowed amount, and these fees can add up over time.
Personal bankruptcy should be a last resort in debt management and debt consolidation. If you have exhausted all of your other options, you can declare bankruptcy, which gives you a court order saying you are no longer responsible for paying off certain debts. However, bankruptcy information remains on your credit report for 10 years. This can be a major roadblock in obtaining credit, purchasing a home, securing life insurance, or even getting a job.
Free Debt consolidation may seem like a daunting task, but you have to be proactive if you want to get your finances in order. No matter how bad your financial situation is, there are a number of realistic ways to improve it, or at least to make sure it does not get any worse and begin your debt consolidation. Use this information as a framework for getting back on the right financial path and take your first step towards debt consolidation today.
This article was compiled by the editors at SelfGrowth.com, the number one self improvement resource on the Web. For more quality self improvement content, please visit http://www.selfgrowth.com.