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.