If you live in the great state of Texas but are drowning in debt, you’re not alone. The average borrower in the state owes around $5,960 in credit card debt while the national average is lower at $5,700 per person. Residents of the state also have among the lowest credit scores, and that reflects the fact that debt is a serious problem. If you are among the many Texans seeking relief for seemingly insurmountable debt, debt consolidation TX is worth your consideration. For many people, debt consolidation is a viable way to pay off debt faster; to incur lower interest charges and fewer fees; and to rebuild credit.
Unfortunately, there are many misconceptions out there about debt consolidation TX, including what it can and can’t do. Read on for seven things that you need to know about this popular debt relief strategy.
1. Texas is a Great State for Debt Consolidation
Texas laws are very conducive toward paying down or even eliminating debt through debt consolidation. For one thing, unlike many states, creditors are not allowed to garnish wages for unsecured debts like credit card debt; your wages aren’t at risk, so you have time to work with a debt consolidation TX agency. For another, state law does not allow creditors who win judgements to place liens on properties for unsecured debts. Therefore, your home isn’t at risk, either, and you have the flexibility that you need to pursue debt consolidation.
2. Debt Consolidation Usually Includes Credit Counseling
One popular argument against debt consolidation is that it does nothing to address the issues that caused the debt to pile up in the first place. However, the vast majority of debt consolidation programs include some sort of credit counseling. The overall goal of this counseling is to increase the consumer’s financial literacy. Such programs teach consumers about creating budgets and more, reducing the risk of needing debt consolidation services again in the future.
3. Debt Consolidation Loans and Debt Consolidation Programs Aren’t Interchangeable
Contrary to popular belief, debt consolidation loans and debt consolidation programs, or DCPs, are not one and the same. With a debt consolidation loan, you generally take matters into your own hands by obtaining a new credit card or loan that has a lower average interest rate than your existing debts. The various debts are transferred to the new card or loan, and the old cards are closed. You then have one monthly credit card payment to make. Debt consolidation programs, on the other hand, involve handing over a single monthly payment to a DCP agency. The agency then disperses the funds to your creditors. They typically negotiate lower interest rates and fees as well, which helps you to pay off the debt more quickly.
4. Pay Less Interest with Debt Consolidation
One reason that debt can spiral out of control so quickly is because of compounding interest. The higher the interest rates are on those credit cards and loans, the more expensive it will be to eliminate the debt. Debt consolidation lets you place all of your high-interest debts onto a single, lower-interest loan or credit card. The only caveat here is to avoid loans and credit cards with low introductory APRs that skyrocket later on.
5. Debt Consolidation Can Improve Your Credit
Whether you opt for a debt consolidation program or loan, taking this step allows you to start improving your credit more quickly. When taking a debt consolidation loan, your credit score might initially dip a little from closing several older accounts at once. At the same time, however, you are eliminating accounts that are near their limit, and that will improve your overall credit utilization rate and, in turn, your credit score. With a DCP, missed payments are a thing of the past, and a better payment history should lead to improved credit before very long.
6. Debt Consolidation Agencies Advocate for You
While you can pursue debt consolidation TX yourself by acquiring a new credit card and moving your debts over to it, doing so means missing out on the advocacy that you will enjoy from a debt consolidation agency. Such agencies typically have strong relationships with lenders, and they use those relationships to negotiate things like lower interest rates, reduced or eliminated fees and more.
7. Make Sure You Will Really Save First
For many, debt consolidation TX is the most reliable way to avoid bankruptcy and to pay off debts more efficiently and affordably. However, it is up to you to do the math to determine whether you really will benefit from the arrangement. Even if debt consolidation will give you a lower monthly payment and lower interest rate, it may still cost you more if it’s extended out over a long period of time. While the primary goal of debt consolidation is to reduce the debt, which includes obtaining a lower interest rate, the secondary goal is paying off debt faster. Make sure to weigh all aspects of debt consolidation before trying it out.
In addition to the above points, be sure to stick with an agency that understands the finer nuances of debt consolidation in the Lone Star State. That way, you can make the most of consumer protection laws and hopefully eliminate your debt that much faster. Taking the time to seek help from a reputable debt consolidation company could be the first step in regaining your financial freedom. Contact us today.