Everyone is desperate for financial freedom. You might not appreciate the gravity of a debt if you don’t have one. But if you do, it’s something that can give you sleepless nights. And that’s where debt consolidation can help.
You can end up in collection agencies where you receive hundreds of calls from collection call centers that do not care about your financial health. This whole situation can take a toll on you and your relationships.
This is to remind especially the young that you should only take on debt only if you cannot do without it. Some debts start in a simple way but multiply so fast that it becomes overwhelming.
Debt Overview
Debts are the reasons businesses file for bankruptcy. Something small as a credit card, if not used effectively can multiply so fast into a big debt that might take you years to repay.
If you don’t trust your financial discipline, I would advise not to take on a new debt. You can first test your saving habits, what are your expenses in relation to your income?
If expenditure is higher than your income, then it’s a red sign already. Better still, you can hire the services of a debt consolidation officer before you get that debt. Read on to find out more about a debt consolidation officer and his roles.
What Is Debt Consolidation?
It is where consumers take a big loan and use it to pay off a number of small loans. In other words, you combine more than one debt into a new loan which has favorable interest rates, tenure etc.
You’ll use the amount you get from the new loan to pay other smaller debts, hence saving on the small loan’s finance cost and interest. Also, you’ll have to pay only one debt as opposed to paying multiple payments to your other creditors.
Debt consolidation happens on debts not tied up to an asset. Examples are credit card loan, education loan and unsecured loans, among others. All these are liable to debt consolidation.
A debt consolidation officer is one who teaches you the details of debt consolidation, factors to consider, advantages and disadvantages, etc. He should help you look at other options of paying debts and see what is achievable.
Also, he should charge a minimal fee and be licensed.
Roles of a Debt Consolidation Officer
Teach You Benefits of a Consolidated Loan
He should be able to make you understand the benefits of consolidating your loan. If you have so many loans to pay, it can be stressing and time consuming and overwhelming.
When you seek an officer’s help, he should show you how getting a consolidated loan will relieve you of stress. For instance, getting a personal loan to clear off other combined loans is a great idea because usually, it has a long tenure.
Do Research
He should do research on your behalf for the best-consolidated firms available and advise accordingly. For instance, he will look at the interest rates offered, tenure and other conditions offered by various loan companies.
Based on the best company (with favorable terms and conditions, low interest rates and long tenure), he will advise you on which company to work with. He should also explore other options to resolve debt that may be friendly and affordable.
Advice on How to Pay it Back
You will sit with your debt consolidation officer and examine your current financial health. For example, consider your other loans, Income and expenditure.
Since you are going to pay off all other debts using the new loan, then you are left with only one debt (the new one). You will then need to cut on your expenditure to service this loan.
Otherwise, the longer you take to pay back, the more interest rates you incur which is costly over time.
Last Remark
By the time you need a debt consolidation officer, you are overwhelmed by debts. Paying off too many debts can be stressful and you need to learn how to manage debts and relieve yourself of this stress.
First off, you should talk to a financial advisor at your bank and then talk to a debt consolidation company if that is the only resource you have left because your credit score is not up to par.