Debt Consolidation Loan and Credit Counseling - A Perfect Combination to Get Rid of Your Debt

Debt Consolidation Loan and Credit Counseling - A Perfect Combination to Get Rid of Your Debt

Many people who are knee deep in debt are curious to know how debt consolidation loan and credit counseling can assist them to get rid of their outstanding balances easily. Let me share with you how these 2 financial solutions work.

First thing first, we need to know what debt consolidation is. It is a process of gathering all the unsecured credit card debts and converting them into one single loan. The main purpose of doing so is to enjoy lower interest rate and lower monthly repayment and the debtors are able to pay off their debts faster. Why do you need to apply for the loan since you have already got heavy financial burden? Let me explain to you. You fail to pay off your outstanding balances every month because you have no more cash on hand. In order to protect your credit score, you need to take up a new loan to pay off your existing debts. Since the interest rates for credit cards are always high, it is necessary for you to take up a new loan with lower interest rate so that you are able to save your cost.

What can you do to eliminate your debt systematically?

First thing first, contact the Department of Banking or Consumer Affairs in your state to find out those licensed debt consolidation loan providers. In general, many state governments are requiring the lenders to obtain license before they can charge the consumers for their services. By referring to the related department, you will be able to get the list of those reliable debt consolidation companies easily. Then, you can start approaching the lenders to submit your loan application.

Now, where can you get the credit counseling? In United States, almost all reputable loan providers offer debt management and credit counseling services as part of their loan agreements. The representatives of the lenders are working hand in hand with the borrowers. They provide professional advice to their clients based on the clients' financial requirements. They also assist the debtors to create realistic budget. Besides, they provide practical tips for the debtors to avoid debt cycle.

Seriously speaking, many consolidation loan companies require collateral in the form of a home, vehicle or other fixed assets to protect themselves from taking high financial risks. In order to protect your own assets, as a borrower, you are advised to opt for an unsecured loan which does not require any lien.

Last but not the least; becoming debt free is important. You must make a commitment to yourself. Once you have obtained the new loan, you must clear off your existing debts. Then you should focus on paying off your new loan on time. With proper credit counseling, I believe you will be able to control your finances better.

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