Are you in debt and will like a way out? Some may tell you that debt consolidation grants can help you. But, do such grants really exist? Find out more in this post!
Before we start to get into the thick of things, we would like to state this. The Federal government of the United States does not give any debt consolidation grants! What that translates to, in case you’re still trying to wrap your mind around it, is that there is no such thing as a government debt consolidation grants.
So, to put it in perspective, we know you are probably weighed down by those debts. It seems like you can’t get rid of them, and that’s killing you inside. Maybe it even keeps you up at night, and has pushed you to the limit.
Or maybe it’s now pushed to the point where you are contemplating… Hey, wait, don’t do it!
We know how you feel right now and we know that being in debt is difficult for anyone. But, it’s especially difficult if yours is a low-income family. Though, it is also important to state at this point, that debts are not exclusive to low-incomee families.
The reality is that, millions of Americans from different societal classes have fallen into debt. Whether it’s from overspending, unemployment, or unforeseen bills, it can be difficult to get out of debt on your own. This is where some insight into debt relief programs can help you.
However, we stated early in this article, that there is no such thing as a debt consolidation grants. So, does that mean there is no hope for Americans who find themselves in debt?
Read on to find out more!
What Is Debt Consolidation, And How Does It Work?
Simply explained, debt consolidation is the process of combining all of your debts into a single payment. When done correctly, debt consolidation can lower your interest rates on each individual loan and help you pay off your debts faster.
You achieve this by combining many high-interest credit card bills into a single low-interest monthly payment. As a result, paying less interest saves you money and allows you to pay off your debt more quickly.
Debt consolidation can be done with or without the use of a loan. In that case, a debt management plan, a debt consolidation loan, or a debt settlement program are all effective and reasonable ways to handle credit card debt. Also, a debt consolidation program might help you recover control of your finances if you are unable to make more than minimum payments on your monthly credit card bills.
Debt Consolidation Programs: What They Are and How They Work
The entirety of the process by which the debt consolidation is done is known as a debt consolidation program. Debt consolidation programs come in three varieties, which are:
- Non-profit Debt consolidation
- Loans for debt consolidation
- Debt settlement
The first two are meant for people who make enough money to pay off their debt, but need help creating and keeping to a budget. For such people, the debt consolidation process is fairly easy, if the individual chooses to stick to the program.
However, debt settlement, which is the third option, is utilized in dire instances where debt has become overwhelming.
The Various Debt Consolidation Programs
Non-profit Debt Consolidation
Non-profit consolidation is a payment plan that combines all credit card debt into a single monthly bill with a lower interest rate and premium. Nonprofit credit counseling agencies offer these services, and they work with credit card companies to come up with a lower, more manageable monthly payment for you.
The purest form of debt consolidation is nonprofit debt consolidation. It’s more like a service than a loan, and it’s a purer kind of debt consolidation than debt settlement. You have the support of a non-profit organization that can answer your questions and help you navigate through challenging financial situations.
Benefits of Nonprofit Debt Consolidation:
- This is not a loan, and your credit score is not taken into account when determining eligibility.
- Interest rates that are lower (about 8%, occasionally less) help to reduce monthly payments.
- Credit counselors can help you create a monthly budget that is within your means.
- To prevent this from happening again, financial education was taught.
Disadvantages of Nonprofit Debt Consolidation
- If you skip a monthly payment, the creditor may terminate all of your concessions.
- There is a one-time setup fee of $50-$75, as well as a $32 monthly service fee, but the interest savings should more than cover the fees.
- Except for one emergency card, you must stop using all other credit cards.
Loans For Debt Consolidation
Loan for Debt Consolidation
Taking out a single large loan and using it to pay off many credit card debts is the classic method of credit consolidation. Because you only have one loan, a debt consolidation loan, you only have one monthly payment, which makes paying your bills much easier.
This, however, can be difficult. This is because getting loans, in the US, depends on how healthy your credit score is. Lenders rely significantly on your credit score to determine whether you will be able to repay the loan.
Therefore, If you have trouble paying your credit cards, your credit score may drop, and there may be valid concerns about whether you will be able to repay the loan. You can be turned down for a loan or be charged a high interest rate.
In such a situation, you may be unable to get the loan that you need to consolidate your debts.
Benefits of Debt Consolidation Loans
- Loan interest rates should be lower than credit card interest rates.
- Any sort of unsecured debt can be paid off with a loan.
- The burden of late payments is alleviated by making a single payment each month.
Disadvantages of Debt consolidation loans
- Your credit score, which may be very low if you have a lot of credit card debt, determines your eligibility and interest rates.
- Loans have a limited amount of flexibility. This is because a loan is a legally binding agreement, whereas nonprofit debt consolidation and debt settlement agreements can be canceled at any moment.
- Loans come with upfront origination fees that must be paid. These costs might range from 1% to 8% of the total loan amount.
Debt settlement appears to be an enticing choice for debt consolidation. Who wouldn’t want to pay off their credit card debt in half (or less!) the time? But there’s a reason this is regarded as a desperate measure. Advertisements claiming that debt settlement companies like National Debt Relief can forgive at least 50% of your debt don’t reveal the real story.
This amount excludes the fees you’ll pay for the service, any late fees you’ll accrue while settlement negotiations are in progress, and whether a creditor will accept your offers or not. The outcomes of this type of debt consolidation are unquestionably mixed. Make sure you’ve done your homework before deciding on this path. It’s worth noting that attorneys also provide debt settlement services.
Pros of Debt Settlement:
- You’ll pay a fraction of what you owe.
- This alternative could take less than a year if the creditor is prepared to negotiate and you have enough money to make a compelling offer.
- It can prevent debt collectors and creditors from calling you.
- It will assist customers in avoiding bankruptcy.
Disadvantages of Debt Settlement:
- Regardless of the amount, the creditor is not obligated to accept your offer.
- In 12 states, debt settlement is heavily regulated, making it difficult to achieve.
- Every month, late fines and interest are added to the sum until a resolution is reached.
- By the time you pay the service costs and late payment penalties, your net reduction will most likely be closer to 25% of what you originally paid.
- If the amount forgiven exceeds $600, it is considered taxable income.
Some Organizations That Can Help With Those Debts
Regardless of which option you are going for from the listed ones, there are organizations out there that exist just for you. These organizations can help you implement a debt consolidation program that will finally get you out of debts. For the purpose of this article, we have chosen an organization for each of the three debt consolidation programs.
Non-profit Debt consolidation:
Loans for debt consolidation
The government does not offer any debt consolidation grants. However, there are other tested and trusted ways to help clear those debts. The onus is on you, though, to decide on one of the debt settlement programs, and start your journey towards a debt-free life.
And, hey! This information is everything you need to clear those debts, so just can do it!