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Interest Free Debt Consolidation. What are My Choices?

Are your bills getting too much for you? Does the idea of paying ten, twenty, sometimes even thirty or more bills a month stress you out? Do you hate to open the mail box for fear of seeing yet another credit card bill? Do you hate answering the phone for fear of being harassed by yet another bill collector trying to collect on a card you maxed out over a year ago? Debt consolidation may be the option for you.

There are two ways in which to approach debt consolidation. One option is a debt consolidation loan. The other option is to hire a debt consolidation counselor. Both have their benefits and their down sides.

The first option that will be discussed is the debt consolidation counselor. Usually you can simply call them and do everything over the phone. Some bigger cities actually have walk in offices that specialize in debt consolidation. Either way, the process is basically the same. The counselor will get a copy of your credit report from all three major credit bureaus. These reports contain all your credit information including loans, credit cards, merchant accounts, rentals, NSF checks, and many other financial things. The counselor will then add up all the bills together to get one total. Then he will break up the total into monthly payments that can be paid on for usually three, five, seven, and in some cases ten years, depending on how much your debt is. Sometimes a service fee is charged, and depending on your terms of service, late fees. This is usually done interest free as long as you are on time with your payments. Sometimes collateral, such as a house or business is required for them to offer you an interest free term. Many times collateral is not required. Each counseling service is different. You just have to shop around and see what the best option for you is. The only bad side to this is that it takes time for all of your debt to be paid. If you would prefer to have all your debt paid at once, a debt consolidation loan may be right for you.

The second option is a debt consolidation loan. This option is very common among home owners. You basically do the same thing the credit counselor does in the since that you have to get a copy of all three credit reports and tally up all your debt. You then take out a loan against your home and use the money to pay off all your loans, credit cards, and other debt. You then only have one bill each month to pay. The benefit to this is that all your credit cards are paid off and this looks good on your credit report. You can also, depending on how good your current credit is, get a loan that is more than the amount of you debt for things like a vacation, home repairs, etc. This option also gives you the ability to shop around top get the best deal from banks. Some banks run specials, especially after Christmas, of no interest loans. As long as you don't fall behind on your payments, your interest rate won't change.

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