Debt is an issue that most people face at some time in their lives be it credit card debt bank loans or just owing a friend money debt is a powerful motivator. There are a few basics debt settlement that everyone should understand before either considering a consolidation loan or other consolidation program. The first and foremost issue to address is the type and amount of debt that is held by the person in question.
For those that have debt that totals more than their annual income excluding a mortgage or other large loan debt consolidation can help to dramatically reduce monthly payments and help get them back on the right track financially. Consolidation favors those that have large debts rather than someone that has say 10000 in credit card debt. The process of debt consolidation starts with an assessment of debt. This means going through each statement each loan and each line of credit to determine the exact number that is owed and outstanding. This process often helps many determine if they need consolidation or not. Those that think they have thousands of dollars in debt may be surprised to find a lower debt or may be surprised to find a higher debt.
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Taking the time to look at all debts is the best way to determine eligibility. The next step is to determine what sort of solution you are looking for. Those that want a formal consolidation through their bank should talk to a loan advisor about options those that want to use a third party lender may want to call for information packets regarding the loan they are considering. Either way this step is the information gathering step this helps users determine just what sort of loan they need to get back on top of their outstanding debt. It is important to talk to several different loan agencies to find the best rate and the best loan for your needs.
The third step is to actually start the loan process with the lender that has been selected. In most cases a lender will offer a few different options when it comes to consolidation loans. Most banks offer a lump sum loan that covers the payment of all your debt in favor of one monthly payment to that lender. In many cases a lender will offer a loan amount that is slightly more than the debt that has been accrued in an effort to give the borrower a bit of money to prevent reuse of credit cards. Say for instance a borrower has $10000 in debt and wants a loan the bank will pay off that $10000 and then give the borrower a small sum of money generally a thousand or so. The borrower will then pay one monthly payment to the lending establishment as opposed to twenty payments to various credit card companies and so on. This process is great if borrowers are prompt with payments and are sure to not run the cards back up after they have been paid in full.