consolidators - Debt Consolidators

Debt Consolidators

Debt Consolidators provide a useful and important service to several segments of the American population. For those people that have run up a lot of credit card debt or simply find themselves with a lot of loans to manage, looking for a good debt consolidator makes a lot of sense. But you need to be careful and know what to look for in this type of service or else you might wind up a loan that is simply not in your best interests.

Advertisements Promising Debt Help

If you look carefully at your mail, you've probably noticed a surge in the number of offers you get from advertisers promising debt help. Typically, these advertisements talk about providing you with a consolidation loan, credit repair or simply help with collection agencies.

If the deal sounds too good to true, then you probably don't understand all of the details behind the offer. When evaluating an offer of help, there are just a couple of things that you need to look out for:

Fees - these can be loan origination fees, service fees, application fees - you get the picture. Remember that the objective is to get out of debt, not to spend more money.

Credit Repair - there is really only two things that a credit repair service can provide to you and those are education and help finding errors on your credit report. If you know how the credit process works, this can help you avoid future problems with credit reports. If the report has an existing error, the credit repair service can walk you through the process to get the report corrected.

Loan Terms - when evaluating a loan you need to look at the interest rate or annual percentage rate on the loan and the term on the loan. The interest rate is the cost of borrowing and the term is the length of time it takes to pay off the loan. When comparing offers, look carefully at these two items.

Alternatives to Debt Consolidators

While the focus of this article is on debt consolidators, you need to understand that alternatives do exist. For example you can work with a traditional lender to take out a home equity loan. Home equity loans usually have low fees and low interest rates; however the term of these loans is usually 15 years or more.

You can also "cash out" and refinance your home and include outstanding loans in your new mortgage. Once again, the interest rates on these loans are low but the term or length of the loan is long.

Finally, you can consider taking out a personal loan instead of working with debt consolidators. In some instances you make find better loan terms with a private loan than a consolidation loan. That being said, let's talk about the various types of debt consolidators.

Student Loan Debt Consolidators

If you've got several types of student loans outstanding, you may be able to work out a better deal by working with a student loan debt consolidator. The Department of Education runs a Direct Consolidation loan program that can help former students to better manage their loans and sometimes find lower interest rates on a consolidated loan.

You can find out more information on this program by taking a look at our article on Student Loan Consolidation or by visiting the Department of Education's student loan consolidation center.

Non Profit Debt Consolidators

There are a lot of non profit debt consolidators that have the right resources to work with individuals and help them to develop a long term debt plan. These services are comprehensive and usually involve debt counseling, social counseling, credit repair, budgeting and similar services aimed at educating individuals.

The hope is that these consolidators will not only just help the individuals with their immediate need of finding a loan that they can live with, but also make sure they are equipped with the knowledge that will help them stay debt free in the future.

You can find a non profit debt consolidator by looking for a statement in their promotional materials that mentions they are a 501 (c) (3) not for profit corporation. Some of these organizations call themselves Christian Debt Consolidators and we've got more information on this sector in our article on Christian Debt Consolidation.

Private Debt Consolidators

Finally, you can work with private debt consolidators to find a consolidation loan. This group is really split into two groups. The first includes more traditional lenders such as banks and credit unions. The types of consolidation loans these lenders offer include home equity loans, home equity lines of credit, home refinancing and personal loans. Usually the transaction is limited to the loan itself and debt educational services are not offered the potential customer.

The last group of debt consolidators includes those that specialize in finding debt consolidation loans and providing educational services to consumers. The offerings of this group are identical to those of the non profit debt consolidators except that you should expect professional help, service and advice from these firms.

Unlike the non profit organizations, you will be paying a premium for their professionals and therefore you should expect a higher level of service. When comparing between these firms, make sure you understand the value added services they will provide for you and study the terms and conditions of any contract carefully.

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