40Find out if the helping hand of a DMP can help you consolidate.
When you’re struggling with debt, there’s not one right way to solve the problem. You have consolidation, debt management programs, debt settlement, and in the worst case scenario, there’s bankruptcy. So how do you know which debt solution is the right one for you?
Two factors that define your path forward
In truth, there are two main factors that determine which debt solution you need to regain control. The first is your personal credit rating and financial standing. In a best case scenario, if you have good credit and a high net worth, then you can consolidate on your own or liquidate some assets to get ahead.
On the other hand, if you don’t have good credit, then you won’t be able to qualify for consolidation options on your own at the right interest rate. In fact, you can actually make your debt problems worse. In this case, you need help.
Ideally, what interest rate do you need to get from a consolidation program if you’re trying to eliminate debt quickly?
b) Less than 7%
c) Less than 11%
d) Less than 13%
c) Less than 11%
Getting a professional opinion
If that part about making the situation worse scares you, breathe easy – there’s a way you can get a professional opinion for free so you don’t have to guess about your financial future.
Nonprofit credit counseling agencies offer free consultations to evaluate your debts to help you find the best option for your situation. A certified credit counselor knows all of the options out there and helps you zero in on the one that’s right for you.
Fact: A good credit counselor may be able to help you consolidate as much as $100,000 or more in debt.
That’s why it’s usually a good idea to contact a credit counselor first, even if you end up taking a different option to move forward. The information below can help you prequalify yourself, but it’s always a good idea to ask for help to make sure you’re making the right choice for your unique financial situation.
Debts You Can Consolidate with a Debt Management Plan
The debts below can all be consolidated. Keep in mind that if your debts are in charge-off status, they usually cannot be consolidated, even if they fall into one of the below categories.
- Credit cards
- Unsecured (no collateral) personal loans
- Credit union unsecured loans and credit cards
- Apartment leases (if you no longer live there)
- Mortgage “short pay” balances (when you lose your home, but still owe money)
- Auto repossession (when you lose your car, but still owe money)
- Retail store cards
- Gas cards
- Non government insured student loan
- Past due cell phone or utility bills (if you no longer use the service)
- Medical bills already in collections
In general, how many payments do you have to miss before a creditor moves your account into a charge-off status and sends it to collections?
a) If you miss any payment by more than 30 days
b) If you miss 3 payments
c) If you miss 6 payments
d) If you miss 10 payments
c) If you miss 6 payments.
Debts You Can’t Consolidate
The following debts cannot be consolidated with a debt management program:
- Current mortgage
- A second/third mortgage or home equity line of credit
- Any type of Sallie Mae account
- Standard PayPal accounts
- Federal / government-backed student loans
- Court-ordered garnishments or judgments
- Court-ordered child support or alimony
- Criminal fines and penalties
- Military star cards
- Current provider cell phone or utility bills
- Back taxes (federal or state)
- Casino debt
- Motorcycle credit cards
- Bank overdraft fees
- Secured lines of credit
- Secured loans
- Rent-to-own accounts
- Car repair bills
- Attorney fees
And even if you have a debt that can’t be consolidated, like back child support, you’re not totally stuck. If you can get other debts consolidated and paid off, that will fix your finances enough that you can handle the other problems.
This is why often, financial issues take triage. You have to prioritize your problems and then start knocking them out. If you’re struggling with multiple layers of debt problems, get organized and start taking them on one at a time.