Being in debt is bad enough. Being in debt because of unnecessary splurges is worse. Being in debt and unemployed can be a special sort of hell. Faced with mounting bills, the first thing an unemployed person should do is figure out ways to reduce the monthly debt load. Trimming monthly budgets to the bare bones is one way, but housing, food, fuel, utilities, car upkeep, and medical expenses can be trimmed only so far. Credit card debt should be high on the reduction list.
Credit Card Debt Consolidation
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The first thing an unemployed person needs to do is quit using credit cards except when it is completely unavoidable. You should limit that use to one card alone. Debt consolidation can work, but only in specific circumstances. For instance, if you have only one credit card, approach that lender and see if you can come to some terms to trim your monthly obligation. If you have a number of creditors, including credit card companies, auto loans, and maybe a few others like them, you should seriously consider taking a debt consolidation loan.
Benefits of Debt Consolidation
Take a look at your situation. If you have more than one creditor, you are making payments to each at different times every month. Your creditors are charging you different interest rates. Each is demanding different amounts as monthly minimums. Paper work alone can amount to a monthly stack of bills, written checks, and a lot of receipts. Debt consolidation will roll all those debts under one loan. You will make one payment a month that will be a lot less than the total charged by a number of creditors. You will have one interest rate. Paperwork and remembering different due dates will disappear.
How to Go About Debt Consolidation
First you need to make a list of all your debts - amount owed, monthly payment required, and interest charged. Then you need to approach each of those creditors and work out a one-time cash settlement with each. Creditors, realizing that most of the outstanding debt owed is in the form of interest charges, could be willing to cut your obligation almost in half for a one-time payoff. Once you have these settlements in hand, you need to present them to a loan consolidation lender. You and your financial life will come under intense scrutiny just as it would if you were applying for a home loan. Your credit history will loom large when the lender decides on an interest rate to charge you.
Some Final Words on Credit Card Debt Consolidation
Keep in mind, since they are going to make more money, debt consolidation lenders favor customers with large liabilities. If you are uneasy about making one-payment settlements with your creditors or feel intimidated approaching a debt-consolidation lender, you might want to consider hiring a debt consolidation consultant. Of course, you will be paying them a good sum of money for doing something you can do yourself. Do research, either on the Web or through advice from some of your creditors, to discover a credible consultant to usher you through the process. Unscrupulous consultants are out there who will have an eye on your money and not your best interests.
Soon, you will have reduced your monthly obligations to one single payment a month. If you are unemployed, this can help keep you insulated from foreclosure, bankruptcy, or worse.
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