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 In this publication on debt consolidators, we're going to talk about the different types of specialized services in this area. For example, we'll briefly discuss consolidators dealing with student loans, Christian / nonprofit consolidators and private lending institutions. We're also going to finish up with some of the alternatives you have to debt consolidation loans.
The Role of a Debt Consolidator
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 consolidation loan that is simply not in your best interests.
Advertisements Promising Debt Help
If you look carefully at your postal service mail or emails then 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 negotiating with collection agencies.
If the deal sounds too good to true, then you probably really don't understand all of the details behind the offer. When evaluating an offer of debt help, there are just a couple of things that you need to look out for:
- Fees - these can be loan origination fees, service fees, and application fees - you get the picture. Remember that the objective is to get out of debt, not to spend more money on fees that only help the consolidation service.
- Credit Repair - there is really only two things that a credit repair service can provide to you and those are financial 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.
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.
Nonprofit Debt Consolidators
There are a lot of nonprofit debt consolidators that have the right resources to work with individuals and help them to develop a long term debt management plan. These services are comprehensive and usually involve debt counseling, social counseling, credit repair, budgeting and similar services aimed at educating individuals that find themselves having trouble paying their bills each month.
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. They do this by understanding why they are in debt and developing a realistic plan to help them stay out of debt.
Christian Debt Consolidators
You can find a nonprofit 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 type of service provider 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 lender 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.
This 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 nonprofit debt consolidators except that you should expect professional help, service and advice from these firms.
Unlike the nonprofit organizations, you will be paying a premium for their professional advice 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.
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 relatively long.
Finally, you can consider taking out a personal loan instead of working with debt consolidators. In some instances you may find better loan terms with a private loan than a consolidation loan.
Debt Consolidation Calculators
If you'd like to see just what a private or consolidation loan might cost you each month, we've got several online calculators that can be helpful when evaluating your loan options including:
- Consolidation Loan Calculator - allows you too bundle your existing debt into a consolidate loan and see what the monthly payments would be for that loan regardless of the service used.
- Credit Card Payoff Calculator - if you've got a lot of credit card debt and what to see what it might take to pay it off, this calculator can help.
- Student Loan Payoff Calculator - similar to the credit card calculator, this tool helps you figure out what it might take to pay off your student loans.
- Debt Reduction Calculator - another debt tool that helps you to build a plan to reduce your debt.
- Refinance a Mortgage -if you've got an existing mortgage and are thinking about using refinancing as an option use this online calculator.
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