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What Are Your Options When it Comes to Debt Consolidation?

So you’re in debt. Don’t act so ashamed! Everyone is in debt these days, even old Uncle Sam. Everyone seems to spend more than they make, and that’s not too surprising considering that commercial businesses are always encouraging us to buy now but pay later. Then you also have to factor in the cost of emergency expenses, such as medical or legal fees. There is every reason to go into debt in this day and age. Fortunately, there is every reason to get out of debt. You can do it, and here are some of the options open to you in debt consolidation.

1. Debt Counseling

This is the least effective option in debt consolidation, but the fact of the matter is that it works for some people. All some people need is a hard talking to, and some logical thoughts on how to better manage their finances. Naturally, you can avoid the expense involved in debt counseling by reading about financial strategies online and getting tough on yourself. Create a workable budget and make regular payments on your delinquent accounts. The old-fashioned way still works.

2. Bankruptcy

Another one of the least desirable options, though in some cases you may not have a choice. The problem with bankruptcy, aside from the reprehensible destruction it does to your credit, is that oftentimes you still have unsettled debt to pay. It largely depends on how the court decides to treat you, and if they deem you capable of continuing payments or liquidating assets. In any event, you will need a bankruptcy lawyer’s help in debt consolidation.

3. Debt Attorney

Contact a debt attorney could present you with a variety of legal options including bankruptcy, debt repayment and debt negotiations. A debt attorney knows the law and can do at least two things for you: negotiate better terms and stop creditor harassment. The only downside to this option is that a lawyer’s counsel does cost you top dollar.

4. A Debt Consolidation Company

These companies state that they will negotiate with your creditors in order to reduce the principal balances for each account and then combine them all into one monthly account. They usually charge you a high price for this service and want your combined balance upfront. The advantages are that you can eliminate much of the finance charges if this negotiation works. Disadvantages include a high fee (possibly paid upfront or perhaps taken from the debt you pay off) as well as the risk involved. Not all debt consolidation companies are ethical and some may simply collect your money while putting forth minimal effort. Some operations are outright scams!

5. A Debt Refinancing Consolidation Company

This company is similar to the previous one, and does a lot of the same activities, including consolidation of multiple past due accounts as well as negotiation with creditors for the reduction of interest charges. However, there’s one major difference: this type of company actually refinances the loan for you. This is of crucial importance because settling debt is what you want, and consolidation is made easy if someone just takes that chance on behalf of you. Not all companies will refinance, negotiate and consolidate; not all companies will refinance directly through their institution. However, it’s easy to see the advantages in refinancing a heavy loan, especially if you can get a break on interest and penalties.

These are five options you have when facing debt consolidation. Don’t fall into the trap of getting farther into debt by taking out more credit or applying for bad credit accounts. Honestly work your way up to a higher credit score by paying off your debt.

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