How to Consolidate Your Debt in Georgia

A lot of Georgia residents struggle with some form of debt. Part of what makes getting out of debt so difficult is that the majority of borrowers have to take out multiple loans for different payments. For example, many homeowners take out loans to pay for their houses, but then they end up needing to take out loans for other expenses, such as utilities or credit card payments. In similar situations, borrowers find themselves taking out loans to pay off other debts. This creates a cycle of debt, which is not only very difficult to break, but also leads to taking out even more loans to try and balance everything out.

Fortunately, there is a way to make paying off debt a little easier. Debt consolidation is the act of combining multiple debts into one single payment. Debt consolidation has several advantages. The first is simplicity; even the most organized borrowers can easily become overwhelmed when dealing with multiple sources of debt. Normally, borrowers have to be very careful with multiple plans, since they have to balance out how much they owe, versus the interest rates on their loans. Having everything put into one bill means borrowers only have to focus on one interest rate, and schedule a single payment.

It is very important to note that debt consolidation does not directly alter how much a borrower owes. He or she is still responsible for paying off the loan in full, but debt consolidation makes the overall process much easier. It will likely save money in the long run due to better interest rates.

There are a couple of obvious signs for when debt consolidation is necessary. Anyone that has debt on multiple credit cards, has interest payments which exceed their normal bill payments or is struggling to make even the minimum payments on debt should consider debt consolidation.

Debt Management Plans in Georgia

Under a debt management plan, borrowers work directly with a debt management company. The debt management company represents the borrower, and will speak with creditors on his or her behalf. The overall goal of the debt management team is not only to consolidate all of the debt onto one plan, but also come to an agreement regarding any sort of penalties the borrower has built up from events such as missed payments. Debt management teams will also work with creditors to come up with a better interest rate. In most situations, debt management teams create a payment plan that can be paid off within three to five years, but the overall timeframe may vary depending on the financial situation of the borrower.

The debt management team also works closely with clients to determine what they are capable of paying. As a result, the team will assist with things such as budgeting monthly payments and the setup of an easy-to-follow payment schedule. These services are very important, since they help keep borrowers from falling even further into debt.

Borrowers are strongly encouraged to do research on a debt management company before signing up. During the interview process, borrowers should keep an eye out for a few things. Legitimate debt management companies are very upfront about how long things will take. If they are promising a quick and easy fix, the borrower should look for another company. Even during the interview, debt counselors should offer budgeting advice and look at the credit score of the applicant.

Debt Consolidation Loans in Georgia

Debt consolidation loans have the same purpose as debt management plans, but the borrower does not work with a debt management team. There are two types of debt consolidation loans available: secured and unsecured. With a secured loan, the borrower is required to put up some form of collateral for the loan, such as a piece of property or a vehicle. Unsecured loans do not have any collateral, which makes them much harder to obtain.

In most situations, unsecured loans are only available to borrowers who have small debt, which can be quickly repaid. Unsecured loans have much higher interest rates, since they are intended to be short-term. The other difference is that some secured loans will allow for tax deductions depending on the interest rate.

In most situations, debt consolidation loans are much riskier than working with debt management teams. The borrower takes on all of the responsibility, and depending on the type of loan, he or she may end up losing the collateral. However, a debt consolidation loan is typically paid off much faster, which means that the borrowers have their credit scores improved at a faster rate. Debt consolidation loans are generally recommended for borrowers that specifically have credit card debt, since this type of debt usually does not require lengthier payment plans.

Since the borrower cannot directly go to a debt management company, he or she must approach a bank or a credit union to get a debt consolidation loan. Acquiring the loan can be difficult, depending on the circumstances of the borrower. Borrowers that are rejected after speaking with a couple of different lenders should strongly consider debt management plans, instead.