There are a number of factors that determine if you’re a good candidate for debt consolidation. The amounts and types of debt impact your options. In some cases, consolidation may not be necessary. In others, it may be very helpful. Here are some details to consider if you’re wondering whether or not to seek professional consolidation help.
Who Should Consider Professional Debt Consolidation?
Consolidating debt with a credit counseling agency or other debt relief company may not be the right choice for all consumers. Those with too little debt, for instance, probably do not need to resort to professional consolidation. Conversely, those whose debts have ballooned beyond a certain level may need a more drastic solution like bankruptcy.
So what exactly does a good candidate for professional debt consolidation look like? Let’s take a look at a few factors that determine if you should look into consolidating or not.
Amount of Debt
Most debt consolidation companies do not have a minimum or maximum for the amount of debt necessary to enroll in a program. However, if your debt is below one thousand dollars you are probably better off resolving the debt on your own. You may consider trying one of the DIY consolidation methods.
If your debt is above 50 thousand dollars, it is likely that you have multiple forms of debt. It is possible that some or all of your debt may not qualify for professional consolidation. Only debt from certain lenders qualifies for inclusion in a debt consolidation program.
Types of Debt
Debt that is attached to collateral generally cannot be consolidated. That means mortgages, home equity lines of credit, car notes, and other secured debts do not qualify for consolidation. Additionally, debts from lawsuits or back taxes are also not able to be handled by consolidation.
Student loans and payday loans are serviced by companies that do not work with debt consolidation agencies. You can still consolidate debt from other sources, but these debts will remain separate.
That leaves credit card debt, medical bills, and other personal debt. If you are struggling with these forms of debt, then consolidation is an option to consider.
Account Status & Financial Outlook
Debt consolidation is a way to help people whose debts are beyond their means or are so numerous that keeping track of payments is difficult. It is not a quick fix to solve debt problems. You can use a debt consolidation calculator to help determine if you’re in need of professional help.
If you are able to make larger than minimum payments or only have a couple creditors to deal with, then continuing to handle the debt on your own is still a good option. Debt consolidation does not affect your credit score. However, many programs require that you close accounts, so your credit utilization ratio will drop. As a result, your score will temporarily drop.
Your credit will bounce back gradually throughout a program and financial professionals will be available to answer questions. If you think debt consolidation might be right for you, then it is wise to search for a non-profit agency with good reviews from organizations like the better business bureau.
If you’re struggling to eliminate debt call American Consumer Credit Counseling today to speak with a certified credit counselor at 800-769-3571.