The first thing you should do is to calm down, not get nervous or make any hasty decisions. Who is nervous that makes mistakes, and your rash actions and decisions only play into the hands of the the credit business establishments.
First, the United States is a civilized state, so you are unlikely to be judged for your debts. The bank will try with all its efforts to get every last cent out of you and at least somehow make money on it.
So, you have $20,000 in debt. Let’s say you have already paid the fourth part – $5,000. There is still $15,000 left to pay the bank back, but you are not able to do this, because there is no work, or you are studying, or due to other life circumstances. In addition, the situation is complicated by accrued interest and/or penalties for late payment of bills.
The first thing you should do is to call the bank’s credit department and inform them about it. Basically, (although not immediately) banks put itself in your place, because they are afraid of clients who have fallen into bankruptcy. None wants to deal with a client who has no business, no real estate, no job. On the other hand, banks such as Bank of America and Capitol One do not very well attract over-diligent customers, simply because such cheap financial institutions are only set for quick profits. A client with an perfect credit history won’t bring profit either.
What is debt consolidation?
Debt consolidation is the consolidation of several “expensive” consumer loans into one mortgage that is cheaper to service. This program helps to reduce spending on loan repayment, since after combining several unsecured debts into one collateral, the interest rate is noticeably reduced.
In other words, you receive one large amount on the security of property to pay off several debts, and then you bear obligations and pay monthly installments to only one lender for one loan.
Debt consolidation is more profitable because:
- the interest rate on mortgage loans is significantly lower than on consumer loans.
- loans secured by real estate involve a longer repayment period. Therefore, the monthly payment is reduced.
- the debt is repaid only to one bank – this saves money, which, in case of several consumer loans, is sent to commission payments for the transfer.
- lending is available with a minimum package of documents. In most cases, only two documents are enough, which significantly speeds up the process of signing an agreement and excludes late payments on consumer debts that are planned to be consolidated.
- for loans secured by real estate, banks are more willing and faster to give approval for the transaction.
- it is possible to take a larger amount, pay off all debts and direct the balance of the borrowed funds to the necessary needs. For example, renovating an apartment, buying furniture, paying for tuition or medical services.
I don’t think I need to remind you how important a credit history is. In the United States, there are three main national bureaus where all the credit history of American buyers is stored: TransUnion, Equifax and Experian, where you can find your credit history. It’s true that they sell you the information they collect on you. In fact, once a year you can get it for free by registering on one of the sites.
Print your story from the site, review it carefully and mark inaccurate information, if any. This will be another point in your game against the banks. The financial system can be so confusing. With a large number of clients, bank clerks often make many mistakes. Your personal information can also be used by unscrupulous citizens; in this case, you should urgently contact the bureau and try to delete this record, since when calculating your reliability, the bank checks the records of these three bureaus. Remember, any miscalculation or error in the system works for you. You can safely put pressure on them, and often these financial organizations meet the client halfway if they have been mistaken.