Debt consolidation is a method of combining all your bills into one monthly payment. By combining your bills, you can decrease the amount you pay per month and reduce or eliminate interest rates. To consolidate your debts, you usually have to work with a debt consolidation company that specializes in helping people manage their debt.
Kinds of Debts that Can Be Consolidated
Typically, unsecured debts can be consolidated. Unsecured debts include:
- Credit Card Debts
- Medical Bills
- Student Loans
Secured debts usually cannot be consolidated, such as mortgages.
How Does Debt Consolidation Work?
There are two basic types of Debt Consolidation:
Debt Consolidation Loan
A Debt Consolidation Loan combines all your debts into a single loan that you make monthly payments on. This process reduces your interest rates and the amount you pay every month. A Debt Consolidation Loan will stop the creditors from calling and can save you from bankruptcy. However, this type of debt consolidation requires you to own a home against which you can take or refinance a loan.
Debt Management Plan
A Debt Management Plan is an agreement your debt consolidation company negotiates with your creditors. The plan describes how and when you are going to pay off your creditors. By sticking to the plan, your monthly payments go down and you can completely payoff your debt. This method of debt consolidation also keeps the creditors from calling you. Additionally, a Debt Management Plan does not require you to own a house.
Do I Need an Attorney for My Debt Consolidation Problem?
Understanding the debt and finance laws of your state can be very difficult. A lawyer can help you understand all the legal issues that you might be confronted with. An attorney will also have experience dealing with creditors and debt consolidation in your state.