Are you drowning in debt? Do you look at your bills and wonder if there is any way you’ll ever pay them off? You have options. Here’s what you need to know when considering debt pooling.
What is Debt Pooling?
Debt pooling, also known as debt consolidation, is a type of debt management plan for those struggling with overwhelming debt. Debt pooling involves borrowing the amount needed to cover all of your outstanding debt from a single entity, like a bank or debt management firm.
You then make a single payment each month for the duration of the plan. Debt pooling loans have a lower interest rate than most loans, allowing more of your monthly payment to go toward the principle of the loan, instead of only paying the interest.
Is Debt Pooling for Me?
Debt pooling helps many people avoid bankruptcy and other financial extremes. However, it is not a one-size-fits-all solution.
If you are considering debt pooling, the first thing you need to do is talk to a financial counselor about it. Many debt management companies offer complimentary evaluations in-person, over the phone, and via online chat. These consultations will help you get a better look at your overall debt.
In order for this to be effective, be prepared to answer sensitive questions about your financial situation. You will want to have these documents with you:
- Your credit card statements.
- Documentation of any budget system you currently have in place. If you do not use a monthly budget, you will want to bring an estimate of your monthly expenses.
- Any correspondence you’ve had with the IRS or your creditors.
- Proof of income (like a pay stub).
The debt expert you speak with will then be able to give you an idea of the debt management options open to you. Ask about debt pooling specifically.
According to AC Waring & Associates, Inc., debt pooling has these benefits:
- Minimizes the impact on your credit score.
- Offers an interest rate lower than traditional loans.
- Manageable repayment.
- Avoidance of bankruptcy.
- Putting all your debt into one place.
However, debt consolidation is not for everyone. Consider these elements before choosing a debt pooling plan:
- You often only get one opportunity to negotiate your repayment plan. Take your time and consult with an expert before you agree to the repayment plan.
- The loan will need to be paid. If your payment relapses, your assets will be seized.
- Debt pooling will not affect agreements with creditors not covered by the loan proceeds.
Whether or not debt pooling is the answer for your debt, the best decision you can make today to eliminate your debt is to reach out for help. Whether it is with a professional or just a well-to-do friend you can be sure to take a mountain of worry from your shoulders by reaching out. The longer you wait to set up a consultation and tackle the problem, the more debt will accrue and the worse off you will be.