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Five Personal Debt Consolidation Myths

There are several different myths when it comes to personal debt consolidation. Today, it seems as though everyone is able to get a home equity loan to pay off their credit card debt and college loans, but with all the commercials advertising personal debt consolidation, it leaves you wondering what the catch is. Well, here are five myths to debt consolidation that you should be aware of:

1. Credit Counseling vs. Debt Management Programs

Guess what - they're the same thing. Credit counselors help consumers learn to budget and learn to make disciplined and consistent payments. They teach you how to manage your debt and get out of it. Debt management programs (DMPs) is a tool that the credit counselor has. They take your monthly payment and distribute it to everyone that you owe until your debt is paid off.

2. Credit Counselors will cut your monthly payments in half

Very rarely is this true and basically it's just a numbers game. If you miss two payments of $100, for example, then your third month you are going to owe $300. What the DMP will do is have you pay $100, so that it appears you are paying half a payment, when in reality the rest of the money you owe will be added to your total debt owed. You are basically putting off paying what you missed at a later date.

3. Interest rates are lower at some companies than they are at others

This is basically an advertising tactic to pull people in and get them into the system. The advertisements that show low interest rates are misleading most individuals. The low interest rates that are advertised are reserved for those with excellent credit, A-list credit. The majority of the people who are drawn in by the advertisements are lower down on the credit spectrum and will end up with higher interest rates because of it.

4. Some agencies can negotiate lower payments for personal debt consolidation

This may be true in some instances but what really ends up happening is that the individual pays a lump sum to a credit counselor who holds on to the money until creditors begin demanding payment. Your credit score is getting destroyed while they are doing this and then they negotiate to pay back your debt for pennies on the dollar.

5. Debt Settlement is your cheaper option

Debt settlement is not your only option for personal debt consolidation; in fact, you should avoid this option at all costs. The debt settlement company simply holds onto your money until the creditors give up on getting paid. If you miss a payment to the debt settlement company, they keep all of the money you have paid them as a fee. In the mean time, the creditors are still sending you letters and you are still getting collection calls and your credit score is being maimed in the process because all of the letters and phone calls count against you even though you are in the program.

A Scam to Avoid in Personal Debt Consolidation

In recent years, there have been several scams evolve around personal debt consolidation involving free government grant money. Most of these ads claim that trillions of dollars are available to help people pay off their personal debt consolidation loans to student loans. Just about anything you can think of. Does this sound too good to be true? Well, guess what - it is.

No, the government is not just giving away all this money to help people pay off their personal debt consolidation loans and whatever they want. Grants are typically only provided to people who are going to use the money to do something good and useful for the economy. Granted, paying off your personal debt consolidation loans probably would be doing something good for the economy, but that situation does not typically qualify for a government grant. Another good sign that an advertisement is a scam is when you have to pay money to make money; this is a typical sign of a scam.

Most of these offers on television are just scams - plain and simple. They are only interested in helping the economy or the country in some form. If you are interested in bringing water to some remote town in the desert, then you may find an organization that is willing to bestow a grant upon you, but they are going to want to see the results of their money. If they find out that you used their grant to pay off your personal debt consolidation loan, they are not going to be very happy and will most likely sue you for misrepresentation and a breach of contract for the grant money.

Another clue to give that these ads give you that they are a scam is the fact that they say the grant money is “free.” If it was real grant money, then of course it's free. That is the whole purpose of a grant, to give you free money to do something good with. Grants are bestowed to people that intend on using the money for a good cause for humanity, not a good cause for your personal credit and debt relief.

If you see one of these advertisements for grants that are for money to pay off your personal debt consolidation loans, you should contact the Better Business Bureau. The Better Business Bureau usually knows of any scams that are going on and will be able to let you know if the advertisements are scams or not.

Bankruptcy is Not Your Only Option

Everyday you watch the letters and phone calls come in. There is a knot in the pit of your stomach and you can't get it to go away. You are stressed and worried. You look at your children and wonder how you are going to be able to put them through college, or worse yet buy them clothes and shoes and food. You watch every penny you make go towards your credit cards, your two mortgages and car loan.

Sound familiar? Everyday millions of Americans are having the same thoughts and feelings. The only light at the end of the tunnels seems to be bankruptcy and it's a dim one. You don't want to file bankruptcy, but what are your other options?

One option is personal debt consolidation. Begin by sitting down with your spouse and looking at what you owe and what type of debt it is. Look at your credit cards. Determine what their interest rates are and what you owe on them. Begin to prioritize your debt by high interest to low interest. This is the first step.

The second step is to educate yourself. Find out the differences between personal debt consolidation and debt settlement. Determine which method would be better for you by writing out the disadvantages and the advantages of each. Debt settlement is generally your last option because they can wreak havoc on your credit rating.

The third step is to make a phone call to your local bank. Your personal bank will be very willing to help you regain financial control and offer you options to get you out of debt. Through personal debt consolidation with your local lender, you will be able to pay off all of your unsecured debt and make one monthly payment towards a debt consolidation loan.

At the same time you will want to be eliminating any unnecessary credit cards and lines of credit. This will help you credit report because there will be less available credit for you to go into debt with. Lenders will also be more willing to borrow you money if you require it during this repayment process. Another option is also to borrow money on your home equity and use your home as collateral. Not only is this a safe personal debt consolidation option, but you will have even more motivation to pay off the loan. Bankruptcy does not even enter into the equation here.

Beat The Lenders Before They Beat You in Personal Debt Consolidation

Personal debt consolidation is not difficult. In fact, many Americans are taking care of their own debt and developing their own strategies. This is a simple personal debt consolidation strategy that will allow you to beat the lenders before the beat you.

1. No longer accumulate consumer debt. From now on anything you purchased on a credit card must be paid in full at the end of each billing cycle, absolutely no exception.

2. Make a complete list of all of your debts. Make sure to include all car loans, school loans, credit cards, home improvement loans, and any other debts that you might have acquired. It is not a bad idea to even include your home mortgage on this list.

3. For every item that you have listed make three columns next to it:
a. List your current balance on any amount owed.
b. Write down your minimum monthly payment.
c. Calculate the number of months it will take to be paid off.

Write down the estimated total into each column. To determine the amount of months it will take to pay off, divide the amount that you owe by the minimum payment. Throughout time when you're balance goes down, your payment will go down, which may directly affect the totals.

4. Take the number of months and began ranking each debt. Place a one by the lowest number of months, a two by the second lowest number, and continue this process until you get to the bill with the highest number of months. This is the order that you will pay off your debts. You start with the lowest number of months so you can achieve success in this program quickly. Once you get your first bill paid off you will fill good about yourself and see light at the end of the tunnel. This is the first move in personal debt consolidation.

5. If you are dedicated about getting out of debt and becoming financially free, then generate $150-$200 per month. To be blunt, if you cannot generate this money then your odds of becoming financially independent are slim.

6. Begin paying the minimum amount on every debt that you have except for the debts that you have put a 1 by. On the debt marked with a 1, apply the $150-$200 plus the minimum amount due. Do this every month until this debt is paid off. When you have paid this bill you'll scratch it from your list.

7. Take the time to congratulate yourself!

8. Once again pay the minimum amount that is due on every bill except for the debt that is marked 2. On the deal marked 2, paid the minimum amount due, add the minimum amount payment and that deal number one had and apply it also, applied the hundred and $50-$200 extra to this bill now. Repeat these steps on every bill and you will be amazed at how quickly your debts will be paid off.

9. Pat yourself on the back and congratulate yourself.

10. By the end of your debts owed, your monthly payments should be quite substantial. After your bills are paid all use the same program to build an emergency savings fund, and eventually start investing. Congratulations, you are on your way to financial freedom and you succeeded in your own personal debt consolidation system.

Considering Debt Settlement for Personal Debt Consolidation

For many people, debt settlement may be inevitable. They have considered personal debt consolidation but there just seems to be little hope because the amount of debt is just too much. These individuals are very vulnerable and must definitely educate themselves before relying on debt settlement companies.

There are many options when it comes to debt settlement companies. In many instances, these individuals have considered personal debt consolidation but they may owe in the area of tens of thousands of dollars and even a low interest loan is going to be expensive over the several years that they will have to pay on the loan.

If you are in trouble in the area of revolving debt and you have defaulted on credit card payments, paying a personal debt consolidation loan is going to hold you accountable for almost twenty years. A reputable debt settlement firm may be able to reduce your settlement by 75% and give you the option of being able to pay off your debt within three years.

This sounds great, but how does it work? When you enroll with a debt settlement company your lender will re-age your debt. Then you will begin paying a monthly payment to the debt settlement company. Instead of getting a personal debt consolidation loan, you pay this company and they pay your creditors.

This is where you have to be careful. Some agencies will simply hold on to your money and wait until you have enough to pay off your debt. Then they will negotiate with the company to pay off your debt at a discounted rate to them. In many cases the creditors are just happy to get some of the money and will deal with the company. This company will keep the rest of your money as a payment for negotiating on your debt.

In the mean time, you may still receive collection calls and letters from the creditors. Even with reputable companies this may occur for a few months. The reputable companies will work with the creditors to end the calls and will begin negotiations right away. If the calls do not stop, you should contact the company because they may be holding on to your money and none of your debt is being paid on. If this occurs, be prepared to have a horrible credit rating at the end of the process.

Because you credit rating may take a beating during this process, you will want to be sure that you research the company that you choose to deal with extensively. You do not want your credit rating to be destroyed even when you are trying to do the responsible thing. Debt settlement companies should only be used as a last resort. If your debt is not extreme, you should consider personal debt consolidation through your personal bank as it will be less stressful situation and your credit rating will be saved.

Debt Elimination is a Scam for Personal Debt Consolidation

Those in debt are bombarded on a daily basis by calls, letters and junk mail trying to convince them that debt elimination is the service they need to keep their home, cars and to get out of debt. They tell debtors that the banking system is illegal and that the debt they think they have doesn't really exist.

They claim that by calling them they can wipe out your debt for good because it doesn't really exist. Although this sounds very tempting, there are more logical options available such as personal debt consolidation loans and home equity loans for homeowners.

There are thousands of Americans who just can't seem to make ends meet. They can't pay their mortgage because if they do, they won't be able to eat. With gas prices going up and wages going down, they don't seem to have enough income available to survive, much less pay their bills. Their friends and family may try to help, but there is only so much that they can do.

What they can't pay in money they can pay in advice. They too are seeing all of these commercials and advertisements and it doesn't really sound all that bad. So one day, out of complete desperation, they decide to give it a chance. They call up one of these companies claiming that their mortgage doesn't really exist. They tell them that the mortgage is just a bookkeeping detail at the bank. They tell them that their debt is really not backed by more than a piece of paper.

The homeowner becomes enraged and they begin to believe this company. They begin to believe that the debt is really not real. These companies then charge the homeowner a fee of $1500 or more to do the paperwork. The paperwork will relieve them of their fraudulent mortgage and they will be debt free and still have their house.

Then reality hits them. The company tells them that the paperwork is filed, but the banking system controls the government and the court system, so it is not their fault if they continue to come after you. It is not their fault if they sue you and foreclose on your home. The homeowner is left with nothing. The house is being foreclosed and relationships may even be destroyed. Several marriages have fallen victim to this sort of scam.

So, what are you to do when you are in debt and can't seem to get out on your own? You have a couple of options as a homeowner. If your debt is not expansive, you can take out a personal debt consolidation loan with your bank or credit union. The loan is used to pay off your debts such as credit cards and personal lines of credit that are holding you back.

You can also take out a home equity loan through a line of credit or second mortgage. When you are paying these bills off your first priority should always be to make your mortgage or rent payment. Your house is your home and you would rather keep it, even if you have to do without a telephone, cell phone, Internet, cable, satellite or any other insignificant luxury that has helped you get into debt.

Easy Personal Debt Consolidation

When all else fails, personal debt consolidation may be the key. But what do you do? Where do you start? One place to start is at your local bank. If you have a good repoire with your bank, they will be more than willing to help you out. They will also be glad that you are showing the initiative to take care of your debt, especially if you owe them as well. There are a few options for those in debt and the process can actually be quite simple.

The first step in making personal debt consolidation easy is to be at ease with your decision. In fact, you may even want to celebrate the fact that you are making strides to turn your life and your credit around. Do not be ashamed of your situation as millions of people are suffering from the same type of debt you are, the difference is that you are making strides to turn your debt around.

If you have chosen personal debt consolidation to turn around your life, you have made a great decision and you should feel good about yourself. Studies have indicated that debt consolidation is a great way to get out of debt with high interest credit cards and personal loans.

One reason is because you can get a personal debt consolidation loan and begin making one monthly payment to your lender. This keeps you from having to pay many different creditors with numerous different interest rates and payment dates. The loan will pay off all of those debts and then you can begin working on the loan itself. Imagine how great it will feel when you write those checks to pay off those lenders.

Another reason that personal debt consolidation is an excellent choice is because not only do you have to pay only one lender, but the collection calls and letters from those other guys stop because you have been able to pay them off. What a relief it is to not have to worry about who is calling and what you are going to have in the mail.

Personal debt consolidation also helps keep people from filing bankruptcy. Bankruptcy is an unpleasant and stressful event. Bankruptcy strains a family and an individual. It is also on your credit report for ten years.

Personal debt consolidation allows people the option of paying off all of their debt and then working towards one loan that will help to show consistency and responsibility on their credit report. Debt settlement and negotiation companies should be your last option because they simply destroy your credit report and charge high fees that make your stress level even higher. They also do not make the personal debt consolidation process simple at all.