Friday, December 4, 2009

Debt consolidation: How to do it yourself

Debt consolidation is a popular solution to debt problems. But it often calls for professional counselors to negotiate and conduct the consolidation process. However, with little practice, patience and knowledge it isn’t difficult for the consumers to consolidate his own debts. He’ll not only save in interest but also on the fees charged by debt consolidations companies.
Here’s how you can consolidate your bills by yourself.
The preparation
It is important to devote some time in preparing yourself before negotiating with the creditors. You must analyze both your debt and income situation before trying debt consolidation. Without this knowledge, you’re less likely to succeed.
Pull out the credit report and get details about the accounts you need to deal with. Write down the outstanding balances, interest rate and your monthly payments towards each of your loans. Also write down the status of the account against each loan, like if your account has been charged-off and placed with the collector. Make sure to pull together your every source of income.
Customize your list
Once you identify all your creditors, the next step will involve customizing the list, i.e. arranging the debts according to their priorities. Debts with higher interest rates and larger balances should top your list.
Draw up a budget
It is now time to put both the debts and income side-by-side to compare the situation.
Add all your expenses – rent/mortgage, student loan, auto loan, child support and the like and subtract the total from your after-tax income. This will give you an idea of your affordability.
Time to negotiate
It is the final step of the debt consolidation process. You have already determined which of the creditors you’d pay off first. Now prepare yourself to negotiate lower rates with the creditors.
It might take time to succeed with the debt consolidation process but one needs to remain focused at his goal. Also it might demand you to put yourself on a strict budget, hence, determination is required. But the end result would be satisfying as you’d be free from debt without causing any damage to your score.

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