When it comes to debt, there are often more questions than there are answers. That’s why we have decided to write up this debt FAQ to give you a better knowledge of the topic.
We’ve also divided it in to sections to make it more manageable – so take a look below.
How should I choose a particular debt consolidation company?
Essentially, you need to evaluate each and every debt consolidation company on its own merits. If you are looking for a specific thing – such as a better interest rate or more flexible repayment terms, ensure that you look for this when researching the companies.
Additionally, you want to make sure that the company you choose is a reputable one. There is nothing worse than finding out that you got a bad deal because the broker was a crook. We have recommended CuraDebt and Care One Credit who we believe are best suited to the market.
Am I Eligible For Debt Consolidation?
This really depends on your individual situation. If you have extremely good credit, the chances of getting a debt consolidation loan are high. On the other hand, if you have poor credit or a history of defaults, it might not be worth looking at debt consolidation.
If you are in this latter category however, it still pays to seek financial advice, as other solutions may be more appropriate for you.
What is Credit Counselling?
Credit counselling is something which people undergo to get a better education on how to manage their credit. You can either do this of your own accord, or you will be forced to do it by a court (if you are declared bankrupt).
Either way, credit counselling can actually be a fantastic way to get your finances back on track, as a trained professional will be able to interpret your situation and make useful recommendations.
Can I Choose the Terms of My Debt Consolidation Loan?
Usually you will have quite a bit of flexibility when it comes to choosing the terms of your debt consolidation loan. If you have good credit, you could even use the consolidation phase to negotiate a better deal for yourself. This ultimately depends on your credit score and previous credit history.
Will My Creditors Stop Hassling Me?
Yes! With a debt consolidation loan, all of your previously outstanding balances are paid off and are all put in to one single loan with another provider. This means that you don’t have to deal with the old creditors any more, and therefore they will have no reason to contact you!
Can I Add More Debts to my Debt Consolidation Loan?
There is no short answer to this question. Some finance companies might allow it, and others might not. It’s probably best to check with the organisation first before signing the loan documents to make sure.
Can I Pay off my Loan Faster?
Usually, there are clauses in debt consolidation loans which allow you to pay off the debt if you have a large amount of cash sitting in savings. Check this with the provider however, because each agreement differs when it comes to these specifics.
Credit Card Debts
How Do I Avoid Credit Card Interest?
Obviously the best way to avoid a high interest rate on your credit card is to either not have one at all, or to ensure that you pay off the entire outstanding balance at the end of each month. Either way – this will ensure there is no interest bill every 30 days.
One interesting way to avoid these huge interest bills is to consolidate your debts. Many consumers with multiple debts are finding that this simple process can save them hundreds of dollars each month.
Can I Go To Jail if I Don’t Pay my Credit Card Debt?
This is quite unlikely. Unless you have purposely defrauded the bank by providing false income details (or other illegal things) – the worst that can happen is that you will be taken to the bankruptcy court and declared bankrupt. This doesn’t result in jail time, regardless of how severe your debts were.
If I Don’t Pay my Credit Card, Will My Assets Be Taken?
Simply – no. Credit cards are unsecured debts, and therefore the creditor does not have the right to seize your assets if you fail to pay. Obviously there are exceptions to this, so it’s best to read the fine print on the credit card contract (you did read it, right?) before signing up for a card.
I’ve Got Huge Credit Card Bills – What Should I Do?
There are a number of things you can do if you have multiple credit cards with outstanding balances. Probably the best option would be to consolidate these in to one loan which was easier to manage. This way, the interest is reduced, and the entire loan becomes more manageable.
General Debt FAQ
Can My Creditors Sue Me?
Yes they can. If you have a balance which is outstanding, the creditor can either take steps to send you to the bankruptcy court, or they can sue you directly if they believe you are just refusing to pay. Either way, the outcome probably won’t be pretty. It’s best to talk directly to the creditor to try to come to some sort of repayment agreement.
Is My Job At Risk if I Default on Debt?
Usually not – however some employers do have regular credit checks run on their employees to check for things like this. If you are unfortunate enough to be in this situation, it is vital that you seek the help of a trained professional to assist you. CuraDebt has a service specifically suited for this type of case.
What Action will Creditor take if I Fall Behind on Repayments?
This really depends on the particular policy of the individual or business who gave you the loan. Some entities are more flexible than others. For example, a bank might give you a 2 week extension on the repayment date to come up with the cash. However, credit card companies and finance houses are likely to be less lenient, and may repossess your assets just a few days after you miss a payment (and the correct warnings are issued).
Why Am I In This Position?
Debts can creep up on us, and whilst it is your fault, it may not be entirely your wrong doing. Just understand that there are plenty of other people out there in a similar situation – and take action NOW to stop things from getting worse.
How Long Will It Take To Get Out Of Debt?
This depends on the situation that you are currently in, and the formula that your financial adviser comes up with to get your out of debt. Usually, you will find that within a year or two, things are looking significantly better on the finance front – but this is for the average American consumer.
How Much Does Debt Consolidation Cost?
The cost of debt consolidation is usually not paid by you. If you are able to get a consolidating loan – the broker will take a commission from the financing companies. However, if you are privately consolidating your loan, you may have to pay a small amount in admin fees to cover the costs of getting it all set up.
Should I Declare Bankruptcy?
Bankruptcy is definitely the last option that you should consider when it comes to waging the war on debt. Have you consulted a financial professional yet and described your situation? You may find that there are other things which can be done prior to bankruptcy which are far more beneficial to you in the long run.
Does Bankruptcy Cover All My Debts?
Most debts are covered under bankruptcy. Credit cards, personal loans, mortgages, etc. However – there are also bills and loans which are not covered. These include student loans and tax liabilities. You will still have to pay these off in the future even if you are declared bankrupt.
Will I Lose My House?
Most likely – if you have equity in your home – the house will be sold to pay for the outstanding debts. However, this is looked at on a case by case basis, and the court will determine whether the home needs to be sold or not.