Alabama Debt Consolidation: What to Do When Bills Take Over Your Life

auburn university in alabama

Debt consolidation programs can help you deal with unsecured debt legally so that you can start improving your financial health. Professional nonprofit credit counseling provides useful tips for managing your money, and trained counselors can negotiate with your creditors and reduce the interest rates that you pay. Credit card debt carries high interest, and most of your monthly payments go to pay interest, which keeps your balances high.

When to Seek Debt Relief

You should investigate debt consolidation any time you have more debt than you can comfortably pay. Credit counseling programs usually deal with unsecured debt, but counselors will include payday loans, credit card debt, hospital bills, utility bills and other unsecured loans when creating custom debt management plans for consumers. If you face the following situations, then you might benefit from consumer credit counseling and debt consolidation:

  • You need to take out cash-advance loans to tide you over until payday.
  • You routinely use your credit cards to pay bills.
  • You never have enough cash to get through the month.
  • You often pay bills late because you need to wait on your next check.
  • You write postdated checks to cover expenses or write checks for amounts you hope to cover before the checks are cashed.

Advantages of Debt Consolidation

An Alabama debt consolidation service at https://www.creditguard.org/states/Alabama/ looks at your underlying financial health and designs repayment plans based on your income, debts and resources instead of what your creditors want you to pay. Truthfully, lenders want you to stay in debt and continue to pay interest, and you need to take strong measures to get out from under oppressive bills. Benefits of debt consolidating programs include the following features:

  1. Fixed Interest Rates

Credit loans can have variable interest rates that make budgeting and planning a nightmare. Understanding your exact obligations makes it easier to plan your monthly spending.

  1. Reduce or Eliminate Penalties

When you need debt consolidation help, you probably have missed a few payments or paid some bills late, which makes your situation even worse because lenders tack on penalties and fees. Credit counselors often persuade creditors to drop these fees.

  1. One Monthly Payment Covers All Unsecured Debts

Your affordable monthly payment pays each of your creditors based on a percentage formula. Lower interest rates mean that more of your payment goes toward reducing your balances. 

  1. Improve Your Credit Standing

Debt consolidation never reduces your legitimate loan balances, but sticking to your agreement satisfies your creditors and protects your credit rating. Creditors stop making annoying collection calls.

Take Back Your Debt-Free Life

You might have difficulty remembering how simple life was when you didn’t have any debts. Debt consolidation can help you retire your debts within short periods so that you have more monthly income to save for retirement and put aside money for an emergency fund. Experts recommend that you keep a financial cushion of two to six months of your pay to help you deal with emergency situations. Once you have some security, you can begin to save for ambitious family goals such as starting a business, buying a home, taking a vacation or paying for your children’s college educations.

Four Steps to Get Out of Debt

If you’re like most Americans, you have a few thousand dollars in unsecured and credit card debt that you carry around each month. Statistics indicate that of Americans who have unsecured debt, the average amount of that debt is about $16,000. If you’re carrying debt, you probably dream of a way to pay it in full – preferably a way to pay it off a lot faster than you ever thought you could. Believe it or not, there are ways to do just that. Here are four powerful tips to get you started.

  1. Focus on one debt first. Throw any spare cash you have at one debt to see some meaningful progress on that account. To get the most financial benefit, choose the account that has the highest interest rate first. To see progress more quickly, choose the account with the lowest balance.
  2. Double up. If you can only make monthly payments, try to make a double payment or another partial payment on at least one account each month. Even small amounts can help chip away at your balance over time.
  3. Take a part-time job. Both of the previous methods require you to pay the minimum required on all your accounts, so unless you have any spare money available – and many people don’t – to increase payments or pay extra, you may need to find a side job to help jumpstart your debt repayment plan.
  4. Register for debt consolidation help. Especially when debts are very big, the first three options can still mean you’ll be paying your debts back for years. To see real progress, you need to reduce the amount you’re paying, and debt consolidation can help you do just that. Debt counseling experts are skilled at working with creditors to slash interest rates and get rid of fees that add up when payments are late or accounts are overdrawn. When monthly payments are reduced, it can be a lot easier to make some real progress in paying back debts. Debt consolidation counseling does not involve taking out additional loans. Programs that advocate taking out additional loans to pay back existing debts are often a quick way to get into even more debt, and they also can involve exorbitant fees themselves, so avoid debt loans at all costs.

Carrying debt can lower your credit score, making it difficult to get a home or car loan, insurance or even a job. Miss a payment and your interest rate may soar. Go over your limit or make a late payment and the fees and penalties can be hefty. What’s more, many studies have shown that carrying debt can cause stress levels to rise significantly, and that can have a direct effect on your health. Credit management and debt consolidation are simple ways to get your debt under control and get it paid back quickly. Today, there are lots of options to improve your financial savvy and reduce debt, so take some time right now to make paying your debt a priority.

With Debt Consolidation, Prioritization is Key

debt consolidation priority

Not everyone is in a position to pay off all of their debts when they enter a financial rough patch.  The person who has lost income may not be in a place to repay all debts on schedule as planned.  It’s not that the person intentionally took on the debt with the intent of not paying it off; it’s just that the decision was made when the personal finance situation was entirely different.  The stressful economy has left many households cash-strapped.  In the new economy, people have had to revisit their debts with prioritization in mind.

Unsecured and secured debts should be prioritized differently.  If the person is unable to pay off all of their debts with their existing budget, one has to treat the unsecured debts differently from the other ones.  The unsecured debts can be temporarily put off because there is no collateral attached to the debt.  Hospital bills and credit card debt can be put off temporarily while one focuses exclusively on catching up on car payments or the mortgage.  It’s always best to look at debt in terms of what assets are at risk if no payments are made.  The problem with not paying on any debt is the impact it can have on one’s credit score.  Both unsecured and secured debts can damage a person’s credit if they go unpaid.

Rather than ignoring some debts while focusing on others, there is another option.  Getting debt consolidation help gets a person back on track.  The person can receive counseling and advice from debt counselors who can structure the debts in a way where no payments are skipped.  All debts can be bundled together in a debt consolidation help program and the person no longer has to worry about the consequences of not paying the debt.  Clients appreciate not having to communicate with each creditor to create a series of different payment arrangements while struggling on a monthly basis to meet commitments made with a limited budget.

If a person has to choose between unsecured and secured debts, the unsecured debts should always come first.  The credit score will be affected in either case if payments lapse.  If working with a debt consolidation help group, the counselor will handle all of the arrangements and oversee the prioritization of the debts.