8 out of 10 Americans are living in debt, with mortgages being the most common liability. Household debt in the United States peaked in 2008, just ahead of the financial crisis, but according to a report published by the Federal Reserve Bank of New York,the aggregate household debt balance in the country has surpassed the $12.68 trillion third quarter peak of 2008. As of March 31, 2017, it stands at $12.73 trillion. Household debt in the United States has increased for 11 consecutive quarters, making this a serious cause for concern.
Debt Consolidation Can Help
The average American home clearly has too much debt, often from multiple lenders. One option is to consolidate the debt with a personal loan at a lower interest rate. There are many advantages of debt consolidation, including reduced monthly payments, just one single loan to deal with instead of multiple creditors, and improved credit score, among others. But before deciding, always compare the options by visiting resources such as Lending Club, Wells Fargo, PersonalLoans.com reviews, Peerform, and Prosper.
A second option is to seek the help of a debt counseling agency. Their accredited counselors can analyze your situation and come up with a debt management plan that is custom-made for you so you can get back on track.
Important Information about the Agencies and Their Debt Management Plans
1 – This is a third-party payment system – You will make one single payment to the agency, which will distribute the money to all your creditors till the money is paid in full. The agency will not settle your debt or give you a loan. It has preset arrangements with financial institutions, often at lower fees and interest rates
2 – The quality varies – Be careful about the agency you choose. Go for a non-profit credit counseling agency that belongs to the Financial Counseling Association of America (FCAA) or the National Foundation for Credit Counseling (NFCC). They both make sure that the agency passes rigorous standards that are set by the Council on Accreditation. Their counselors must also pass a comprehensive certification program.
3 – Counseling before the plan – It starts with a counseling session. A debt management counselor will be allotted to you, who will then assess your entire financial situation. The person will present all the options to you, including consolidation. These sessions can be motivating and enlightening if your counselor is compassionate and knowledgeable. You can ask for another counselor if you find the person pushy, judgmental, or if you are unhappy with the debt management plan that is offered.
4 – You will get a clear picture, and will have full control – The counselor will tell you how much you have to pay the creditors in full in 3-5 years. But usually, the payment is about 2.5% of your total debt. The plan can be stopped anytime. You can decide to pay more as well to get of debt quicker when you have extra money
5 – The plan will be efficient, steady and simple – Your payment will remain constant so you will never wonder how much is to be paid each month. Once one account is complete, a larger payment will go to the other creditors, which will speed up your repayment process.
Credit counseling agencies have offered debt management plans to help many Americans solve their debt problems. They offer a valuable service, but you can achieve the same results on your own as well. You can take a personal loan to consolidate the debt on your own, or negotiate with your creditors yourself as well.