I read somewhere that sooner or later, everyone sits down to a banquet of consequences. This is especially true in the case of debt. It’s possible to have a lot of fun running up debts but eventually there will be consequences and they won’t be pretty. If you have an overwhelming amount of debt, you know exactly what I mean. You’re probably receiving harassing phone calls from your creditors or, worse yet, from collection agencies both day and night. You may be thinking about changing your phone number just to get rid of that never-ending barrage of calls. But trust me when I say that if you do this, you’ll enjoy only short-term relief from those nasty calls as creditors are amazingly adept at finding people who have changed their numbers.
How New York debt consolidation works
The simplest explanation of how debt consolidation works is that you use new debt to pay off old debts.
There are several ways you could accomplish this. For example you could get a bank loan and pay off all your creditors. Alternately, you could go to a non-profit consumer credit counseling agency for help. Or you could do a balance transfer where you transfer the balances on high-interest credit cards to one with a lower rate. It’s even possible to get a 0% interest balance transfer card, which would require you to pay no interest at all for as few as six or as many as 18 months.
How a debt consolidation loan saves money
All three of these forms of debt consolidation can save you money. Let’s take a bank loan as an example and let’s suppose you owe $15,000. If your debts have an average APR of 20% and total payments of $600 a month, it would take you 17 years to become debt free and you would pay a total of $25,611. On the other hand, if you were able to take out a debt consolidation loan at 9.95%, you could be debt free in 48 months, and would pay a total of just $18,112 or a savings of nearly $7,500. You would also be debt free 13 years faster.
How consumer credit counseling could help
A second popular way to consolidate debt is through consumer credit counseling. The way this works is that you are assigned a counselor who will help you develop a payment plan and negotiate with your creditors to get your interest rates reduced. If all of your creditors agree to your plan, you would then be required to send the credit counseling agency one payment a month until you completed your plan. While it’s impossible to say exactly how much you would save with credit counseling, it should be a decent amount.
How a balance transfer could save you money
You could also save money if you were able to transfer your balances on high interest credit cards to one with a lower interest rate. Going back to the example of $15,000 in debt at an average APR of 20% and if you wanted to be debt free in 36 months, your monthly payment would be $558. In comparison, if you transferred that $15,000 in debt to a card with a 12% interest rate, your monthly payment would be just $499 or a savings of nearly $60 a month.
Regardless of which type of New York debt consolidation you choose, it will save you money. The important thing is to choose the one that will save you the most money and yet fit within your budget.
Go Here to compare consolidation and credit counseling and see which one may work better for your financial situation.