Americans and Debt Consolidation

September 20, 2016

Americans and Debt Consolidation

                These days, it seems like there is rarely anyone out there that isn’t dealing with paying back a debt. In some way, shape, or form, we all have some form of debt that we are currently chipping away with our income, but more often than not, people feel like their money isn’t breaking any new ground with their debts, and in fact, feel like they may end up paying way more in the process. And let’s face it, this isn’t something that affects Americans only on the surface level. Money issues have plagued everything from political reform to marriages, and it seems like the more debt you have, the more problems you have, and the more problems you have, the worse it gets. But debt is not inherently a bad thing; without debt, we would not be able to build credit, which we could then use to buy cars and houses. Like most things in life, it comes down to the way you manage debt. Knowledge of your debt and the market can mean the difference between making your routine payments and still feel like you’re struggling, or making those same routine payments and ending up with a few more hundred dollars by Christmas. I’m talking about debt consolidation.

So what is debt consolidation?

                Debt consolidation comes down to combining the sum of unsecured debt and paying it off with one loan that you must then make payments on. For example, let’s say you had a maxed out credit card and a personal loan for medical bills that you just can’t seem to get out of. Now you want to pay them off. The card is running at a balance of $2,000.00 with an interest rate of 19%, and the personal loan is at $1,000.00 with an interest rate of 15%. If your budget would only let you pay $100.00 on the credit card, and $50.00 on the personal loan, it would take you around 2 years to pay off this debt, and by the end of it, you will have paid $583.29 in interest alone. Now let’s say you qualify for a $3,000.00 loan with an interest rate of 12%. With steady payments of your budget-allowed $150.00, you can clear the debt in two years with only paying $389.29 in interest. See what I’m talking about?

What stops me from continuously using my credit card, or taking out another loan?

                Well, nothing. Nothing stops you from continuously using a credit card or taking out another loan. This is where the “management” in “money management” kicks in. You have to have a plan, and you have to stick to that plan. If debt consolidation is going to work for you, you have to make sure you want to work for yourself first. By getting a loan to consolidate all your debts but still incurring other debts, you will make a hole for yourself, and it will become more difficult to get on top of it all. Money can work for you, but you have to be mindful to not give into old habits of spending. Talk with a financial advisor as to how you can effectively manage your income. Develop a budget. Learn how to manage money, and not have money manage you. Remember, you want to consolidate and pay off a loan, not pay down.

Okay, I have debt, and I have a plan. What now?

                Now comes the easy part – shopping. It’s almost ironic, but this time, you’ll be looking for the best deal for yourself. There’s no reason to continue talking to a company that will consolidate your loans at 20% interest rate when there’s another one just down the block who will do it for a 10% interest rate. Remember, these companies survive off of your business, but at the same time, beggars can’t be choosers, so you have to know what you’re working with. The best thing to do is to pull your own credit report, so that you know what’s going on before the lenders do. It is exactly like fighting a battle on your own home turf; you know the environment, and you know what to expect. With this upper hand of knowledge, you’ll be able to determine which lenders are banking on you not reading your own report by the kind of deals they offer. Unbelievably, a whole 1/3 of Americans have never pulled their own credit*, and if you think that lenders are not going to take advantage of that, guess again. 
               
Next, look into the terms of the loan. Look at online reviews people have made about the lender. Compare the rate you’re getting pre-approved for to another offer. Shop around. There’s a difference between a lender who wants you to get the loan and a lender who wants to work with you throughout the entire process.  Do you feel comfortable with the lender? Do you feel pressured? Do you feel like they have the best intentions for you? These things matter, believe it or not. Because “life” happens to us all, and if you ever run into a problem, you will want to be with a lender who can work with you as opposed to a lender whose relationship with you ended once they approved the loan.

Wait, doesn’t Acclaim do loans for debt consolidation?

                Shameless plug here, but yes—yes we do! This article was written out of experience with our members at Acclaim. I’ve seen members sign up for loans with much higher interest rates than what they would have qualified for at Acclaim, and I’ve helped them refinance those loans. You lose nothing by asking better for yourself, and you gain everything when you get it. At Acclaim, we strive to “meet or beat” what other lenders have given our members and non-members alike. So we say, hey, give it a chance. Maybe we can get you a better deal, maybe we can’t, but either way, it doesn’t hurt to look. Chances are, however, we’ll probably get you a better deal!

Click here to get started, or call the loan department at 336-332-4404.

-Cesar Ruales-Ortiz 

*Sources:

“One Third of Americans Have Never Checked Their Credit Report Reveals TransUnion Study.”
                Transunion. Transunion. 29 Oct 2013. Web. 16 Sept 2016.