Is financial stress getting to you? Are the pressures of paying bills getting too much or is there simply never enough money to keep creditors happy? It can be a very tough situation to find yourself in.
Debt consolidation can be a great solution to all of the above financial problems but it is very important that you choose the right debt company to help you out of your situation. So, just how do you go about picking a debt consolidator that is going to alleviate stress, take the burden away from financial pressures and help you to get back on your feet again?
First, however, let’s take a closer look at what debt consolidation is and how it may be able to help.
What is debt consolidation?
It refers to the act of taking out a new loan to pay off other liabilities and debts, often unsecured ones. In doing so you consolidate a series of smaller debts into one larger and more manageable one. This larger debt usually comes with more favourable terms such as a lower interest rate, lower monthly payments or a combination of the two.
It is a great way to deal with mounting debt and to simplify the process of paying back what you owe without it getting too overwhelming. You don’t erase the debt, but rather transfer it to a different type of loan that is easier to pay back.
How it works
Most people will apply through their bank or credit card for a loan in order to bring all their debts together. However, as well as this there are specialised debt consolidation agencies.
It is important to remember that you are not erasing the original debt but moving all your debts to one lender or loan type. If you are looking to settle your debts, then it may be best to look at settlement options in conjunction with a consolidation loan.
Choosing a debt consolidation agency
If you can’t get a loan from your bank or credit card or find their terms a little bit too much, then it might be a good idea to go with a debt consolidation agency. If this is your plan then you will be confronted with a lot of choice, especially online.
That’s why it is so important to know what to look for in your loan provider. Here are some key things to look out for when choosing who to go with.
Association affiliation
Debt companies that are reputable are keen to demonstrate this by being members of relevant organisations and associations. These are bodies that regulate the debt industry and help to ensure best practice with those who seek affiliation. Think of it the same way you would an education institution being accredited. It’s a hallmark of quality.
While there are laws that apply to loan companies and other financial institutions, there is scope within this for bad practice. Being legal does not always mean being fair or doing things in the right way. That’s why being affiliated to reputable bodies is a sign of trust and responsibility.
Third party reviews
Of course, these days in the digital age, it is not just public bodies that oversee best practice. Thanks to the internet you can now find out exactly how other people have found the services and products of a loan provider by looking at the reviews. It is important not to just look at the reviews in the provider’s site (although this can be useful) but to go to trusted third party review sites.
A quick Google search will bring up plenty of named review sites where you can find out more about your prospective provider. Remember that not all reviews are genuine, so it helps to develop a sense of what might be a legitimate review and what is not 100% accurate. Also remember that not everyone is always going to be happy. Negative reviews do happen but look carefully at these and try and see if there is a genuine grievance.
Check professional registration
Any loan company will need to be officially registered to do so. Before you agree to any terms make sure that your provider is approved to provide loans by the relevant authorities.
Compare rates
The two main goals of debt consolidation are to make your debts more manageable and to try and save money. That’s why the rate of your new loan is so important. You should always pay close attention to the interest rates offered and the structure of the repayment plan. What looks cheaper now might not work out that way in the long run. Conversely, it might be better for your situation to pay less each month now but more overall.
There are several big warning signs when looking into loan providers. These include things like asking you to sign bank documents or offering to arrange the wrong kind of loan as a favour.
Your provider should have an in-depth interest in your situation and the more questions they ask, the better. They should also be very meticulous about explaining their loans in great detail and making sure you understand the repayment structure. This is never a transaction that should be rushed and if you feel that is happening then you should walk away. Likewise, if they brush off details or try to claim that paperwork is not important, then this should set alarm bells ringing.
Take your time
Once you have all the facts, then you should take your time to go over the possibilities. Only when you are sure should you make your choice of debt consolidation provider.
Debt consolidation can be a great way to take back control of your finances, but it is something that needs thought and caution before deciding if it is right for you. If you would like more information about choosing the right provider, then get in touch with our team today.
