How does Debt Consolidation work?

On November 27, 2009, in News, by Lewis Alexander
  • How does Debt Consolidation work?
  • What is the best way to get Debt Help?

In our business of managing hundreds of clients finances and helping them with their debt consolidation, we have found that the biggest cause of stress in families is always regarding their personal debt and how best to manage the debt problem that can spiral out of control very easily.

We find that many people are not aware of the debt help that is available for people who genuinely want to reduce their debt and be able to cope with managing their income and expenditure.

There are many financial companies who have an excellent track record in helping people in this situation and these companies are able to ease their clients’ worries very quickly.

Debt consolidation is one method that can be used very effectively to reduce your outgoings and balance it with your in comings, especially with expert help.

  • Many people need educating in what one needs to do in this situation!

Contacting a debt consolidation company will help and educate them as to what decisions need to be made to effectively manage the current situation in the best possible way.  This in itself is a way that a client can receive immediate relief from the worries of not being able to cope financially and the ability to sit down or talk to a consultant over the phone will have long term benefits for the individuals financial future.

Over the many years of managing and clearing clients debts, our experience tells us that once a client contacts a debt management or debt consolidation company, they are put at ease, knowing that that they will not have to deal with a bailiff or collection agent knocking on their door demanding monies that they cannot afford.  The fact that the debt agency is there to help in this situation makes a huge difference.

  • What Is Debt Consolidation?

In the simplest terms, debt consolidation means that you take all of your individual unsecured or secured repayments such as credit cards, overdrafts, loans and catalogues etc and put them all together as one full amount owed. This full amount is the amount that is then arranged into one consolidated loan, offering the benefit of making one lower, affordable and reduced monthly repayment over a longer period initially, if necessary with the effect of reducing ones monthly outgoings.

  • The main purpose of this is to;

1)  Reduce the total amount of debt – this can be achieved effectively when you work closely with one lender who will pay off all your outstanding debt and consolidate it into one monthly repayment.

2)  Create one new payment to a new lender that is far smaller than all the individual payments to various lenders. Debt consolidation companies have much more experience dealing with lenders in this scenario and can also negotiate a much better rate of interest, effectively reducing your overall personal debt.

3)  Allowing you in time to reduce your overall debt if you can make slightly larger payments in due course will have the net effect that you would pay much less in interest over the whole period.

  • One of the benefits that occurs as a result of the above is that you end up with a much better organized financial statement regarding your income and expenditure.

We all find that many bills to pay means you have to be so much better organised and able to meet all the various payments at the due dates or end up paying penalties for late payments, causing you to pay much more in the long run and also affecting your credit rating along the way.

One outgoing for a loan is much easier managed than 10 different payments to various lenders!

  • What are my options when Consolidating my Debt?

1)  If you own your own home and have a reasonable amount of equity in your home you may consider the route of refinancing your existing mortgage to pay off other debts which will reduce your overall interest paid.

2)  If you have a fairly good credit rating you may be able to obtain a personal loan and many people would favor this as the equity in their homes has been drastically reduced in the last few years. You can find out more information about these specialist loans from good debt consolidation companies or debt counselors.

3)  If you have credit cards with large balances then you may opt to transfer all your other debts onto one single card, but you will end up paying higher interest or charges with this method.

4)  Many times you may be able to get help or assistance from family and friends, however, when one wants to keep a certain amount of privacy with financial affairs, most people are swayed against this course of action unless they have very good and open relations with family.  You are also likely to create tensions in family when the last thing you need is further tension, lack of privacy and stress.

5)  Seeking out a professional debt consolidation company – For many people this would be the best option, working closely with a time served and reputable company who have specialists in debt consolidation, debt management and debt reduction will really help you. The advantage is in the fact that they have an in depth knowledge of the areas concerned and also have very good working relationships with banks, credit card companies and general debt collectors and lenders. It is possible in many cases that they are able to negotiate better rates of interest and settlements.

It is important to note here that lately, there has been a surge in new companies operating in this debt arena, many of whom have very little track record and your interests are, shall we say, not their first priority!  It is very important that you do your homework and work with only the best companies that are prepared to look after your interests first, not their own.

Lewis Alexander Financial Management offer a first class personal Debt Management Service, nationwide throughout the UK. We are based in Manchester and we have helped thousands of client’s in our history.  We have in house specialists who concentrate on debt management and loan consolidation and we have been looking after a great number of our clients for many years now.

Call Lewis Alexander on their personal debt helpline using 0800 018 6868, our lines are open 24 hours a day, 7 days a week and your call is free.

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