Am I Eligible for Debt Consolidation?
Consolidating your debt may or may not be right for you. In some situations, a debt consolidation simply does not apply to your unique situation, as it does not pertain to every form of debt. What you may want to do is find out ahead of time if a debt consolidation will work for you. First, before you call a debt consolidation company, find out that if by consolidating you are actually helping yourself with your debt.
Debt consolidation is primarily based on the ability to have your debt negotiated, and thus reduced. If you have any sort of negotiable debt, or what is referred to as pre-payable debt, it must be inclined to allow negotiation and prepayment. This is very important because if this is not the case, you will likely have to look into another type of debt reduction and credit rebuilding. A credit consolidation program will be of no help to you. Look at these things individually first.
In debt prepayment, what you are doing is changing the schedule of your payments. You do this by paying either part, or the total amount owing ahead of time. In prepayment contracts, the debt can come in three different forms: Explicitly or implicitly. If your contract does not mention either, it can be consolidated. Penalization. You can consolidate this debt, but you will have to pay a penalty for paying the debt off earlier than your contract stated. The last is that it may be simply forbidden in your contract. If the latter is the case in your situation, the only way to consolidate is through negotiation. A debt consolidation loan will not be able to help you.
In the case of prepayment penalization, you may want to consider if by including those penalties, you are helping yourself in reducing your debt, or if you will end up paying even more.
If your debt is negotiable, what happens is that you and your creditor will come up with a new contract to repay the monies owed to them. Bear in mind, not all debt can be negotiated, and non-negotiable debt cannot be consolidated unless repaid in full via a debt consolidation loan. Simply, secure debt cannot be negotiated. This is because secure debt gives the creditor with a real estate guarantee. This means that the creditor will be able to get their money back via legal avenues, because the money lent is protected by the use of collateral.
If you have the option of prepaying a non-negotiable debt, you may qualify for a debt consolidation loan. This means that you will be repaying your debt, only under a new contract. If your debt cannot be prepaid, it can still be consolidated provided it is negotiable. If the majority of the debt you owe is either non-negotiable, you do not have the option of prepayment or both, you generally will not be able to secure the services of a debt consolidation company. You will need to look into other avenues. In other words, so long as you have the option of prepaying your non-negotiable debt, or if it cannot be prepaid can be negotiated, a debt consolidation loan may be the right course for you to reduce your debt and lower your monthly payments.
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