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Consolidation Loans: Are They Your Best Option for Debt-Relief?

Debt consolidation comes in many shapes and sizes, as do the companies that offer ways to manage your finances. From "bad credit" consolidation loans for consumers with less-than-perfect credit to so-called "payday" loans to debt settlement plans, the list is nearly endless. So as a consumer, how do you select the best option for your financial situation? Outline your financial goals, research consolidation companies and review your debt consolidation choices.

Loan consolidation companies do a great job marketing their services; you'll see and hear them on the television, radio, newspapers and especially the Internet. Often they'll advertise to consumers with claims of "easy" solutions for those with bad credit, unsecured credit card debt and other bills.

Do not confuse a loan consolidation company's advertising budget with their reputation - what you see is not always what you get. And remember - the lender's primary goal is to make money, which they can only do if you agree to purchase their product: a debt consolidation loan. In addition, be wary of any company that advertises a "quick and easy" solution to your debt problems - in general, these companies tend to use the terms "bad credit" and "payday loans" in much of their advertising.

Making the choice to get out of debt is a big decision. So it's important to take the necessary steps to improve your financial picture the right way. Consider the steps below, and you could be on the road to better money management and financial freedom.

Step 1: Outline Your Financial Goals

When looking into a consolidation loan, consider your goals - are you looking for simply a quick fix, or do you want to find the best plan that offers you a way out of debt, as well as financial education and advice to keep you debt free for life? A solid program will focus on your total financial picture and help you conquer your debt, once and for all.

In addition to your name, contact information and Social Security number, loan consolidation companies will ask for a lot of personal financial information in order to make a lending decision. So before you contact any company about a consolidation loan, it's a good idea to have the following readily available:

  • Your weekly, monthly and/or annual income
  • Any additional income to be considered, such as your spouse's salary, alimony, child support, etc.
  • Credit card balances and interest rates (you can find this on your monthly statements)
  • Information about any other unsecured debts or bills

Step 2: Research Consolidation Companies

When shopping around for a consolidation loan or a debt-relief solution, be sure to put together a list of the companies with whom you may want to do business. Once you have your list, do your homework, which should include the following:

  • Research each company with the Better Business Bureau. You can glean a lot of both positive and negative information from this one source, helping you to narrow your choices.
  • Determine what type(s) of loans and/or debt consolidation plans each company offers and whether they fit the needs of your particular financial situation. It's best to work with a company that offers options, rather than a one-size-fits-all solution to debt consolidation.
  • Assess the interest, repayment terms, additional fees and/or disclosures of each company and each debt consolidation loan or plan. Often the quickest way out of debt is not the most economical or smartest move.

Step 3: Review Your Options

Once you've done some comparison shopping, it's a good idea to narrow down your options to two or three companies. At this point, it's time to take a closer look at the consolidation plans themselves - how they work, what you'll pay, and the features and benefits of each plan. Specifically, ask the following questions of the loan consolidation or a debt-relief company:

  • What is the interest rate on the new loan?
  • What is my monthly due date?
  • How do I make my monthly payment (check, online, money order, etc)?
  • What is my monthly payment, including all fees?
  • What are the repayment terms? (Or how long will it take me to repay the loan/plan)?
  • What additional fees are assessed?
  • What happens if I pay off the loan or plan early? Is there a fee associated with that?
  • Who do I call when I have questions about my plan?
  • How do you ensure my debt doesn't catch up with me again?
  • Can you guarantee this plan won't put me further into debt?
  • What resources are available to me as I get out of debt?
  • How will this consolidation loan or debt relief plan affect my credit?

Remember that a debt consolidation loan may reduce your overall monthly payment, but you may end up paying more or getting deeper into debt over the long term. Be sure to talk to a knowledgeable representative about your concerns, and don't be afraid to probe until you get all the answers you need to find a solution that makes the most sense for your financial situation.

The CareOneSM Difference: Offering Customized Debt-Relief Alternatives to Consolidation Loans

Deciding with whom to partner for your debt consolidation needs is a big decision and one that shouldn't be taken lightly. So be sure to research companies, review your options and ask the right questions. And be sure to talk to a provider of CareOne Debt Relief Services.

We are committed to providing debt-relief options, world-class customer service, an abundance of resources, and ongoing support. We've helped thousands of consumers take control of their finances and conquer their debt. Browse our community forums to hear how people just like you have partnered with CareOne to become debt-free. Or Ask the CareOne Expert to get answers to any questions you have about credit card debt consolidation companies and our debt relief plans.

Visit the CareOne Help Center or contact us via phone or email to learn more about your debt relief options.

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