When debtors are struggling to make ends meet and find they can no longer pay their bills each month, many will look to debt consolidation to get their finances back on track. But many who still rent their home, who are not homeowners, wonder how they can consolidate debt without having
equity in their home or the collateral to get approved for an unsecured bank loan. As
debt consolidation is becoming more common, there are many more options available even if you do not own your own place. There are still ways consumers can
eliminate debt and renegotiate those debts with their creditors, saving money in interest rates and even
late fees.
Working With A Debt Consolidation Agency
There are debt consolidation companies which specialize in negotiating debt with
creditors and enabling the consumer to cut out their debts in a much faster time
than doing it on your own. The debt agency should have professional and
qualified debt counselors, along with a mixed bag of other individuals including
attorneys and financial professionals to help you deal with your finances before
and after you eliminate your debts.
The debt counselor will first work over your finances with you to find out how
much money you have, how much debt you have, and work with you to figure out how
best to manage your financial future. They will devise a plan to enable you to
make reasonably monthly payments according to your income and assets. Once the
plan proves workable, the counselor will then contact your creditors directly
and negotiate the balance you owe.
Creditors want to get paid and therefore most are open to negotiations. Trained
counselors typically have a good working relationship with a number of creditors
and are able to successfully implement your debt elimination plan. Not all
creditors are so flexible but many would rather get a little bit of money at one
time than risk you filing bankruptcy. They may also be agreeable to reducing
late fees and higher interest rates.
The Debt Elimination Options
After negotiations are complete, there will be two likely options for you to pay
your debts. One way is to be given a new repayment schedule that includes lower
rates and lower payments that you will agree to pay on a regular basis. Since
the creditor likely has reduced or eliminated interest charges on the balance
owed, you can then begin to catch up and eventually pay off your total debt.
The second option occurs when your creditors negotiate a reduction on the total
debt if you pay in in a lump sum. This normally happens only when the debt
counselor is able to find approval for a consolidation loan. The loan money will
then be used to pay off the balance of the debt and you will be responsible for
the loan repayment each month.
The Results
With a debt consolidation program, your debt can be eliminated in 3-5 years
depending on the negotiations and the size of your debt. This time line
certainly beats the 20-25 years it may take you on your own attempts to clear
your debts without a consolidation loan. Of course, there are consequences to
these debt consolidations. First, there are repercussions on your credit report
and score as the debts are being negotiated. Your credit score will take a hit
and likely drop in points through the course of your consolidation program.
However, in time, you can rebuild good credit once you eliminate debts and begin
to budget your money. Second concern is that there are several fraudulent agents
who parade as debt consolidation companies. You have to do initial legwork, such
as investigate the company with the Better Business Bureau before signing
contracts with any company.
Despite the drawbacks, if you do not have a home to bank on, you can certainly
still find help getting out of debt through a reputable debt consolidation
agency that will help your eliminate your debt and then stick with you to help
you better manage your finances and avoid debt in the future.
Debt Consolidation