BSP Debt Consolidation
Type of Debt Relief Process


Loans or additional financial support can help people to achieve their long nourished dreams like purchasing a big house or a sports car. Getting approved for a loan is one thing but after getting the loan amount, debt management can become challenging. People are often advised to repay on time and never to miss a debt repayment schedule.

However it is easier said than done, as debt management can be a double-edged sword. Borrowers should make the debt repayments on time to avoid late payment or penalty fees that can be an additional financial burden and at the same time bad repayment history can mess their credit scores and hence credit report. Hence, debt management is very vital to maintain a positive history and also to clear off debt amount promptly.

When a borrower is going through a rough financial patch, he or she can consider few steps to get their finances back on track. Debt consolidation is an effective way to combine multiple nation21 fast loans into a single loan that can be payable on a convenient repayment schedule. However, a borrower should be sure about prompt debt payments before considering debt consolidation. A borrower can consider few options before deciding for a debt consolidation.

What is debt consolidation?

Debt consolidation is nothing but combining more than one or multiple loans that a borrower might have into one single loan. It can also be termed as loan refinancing.  Borrowers with high amount debts and more than one loan usually resort to debt consolidation. Financial experts advise debtors to consider few SOS steps before deciding to consolidate loans.


Things to consider before debt consolidation

  1. Help yourself

To begin recovering from strained financial phase, borrowers should try to sort out certain things by themselves. This introspection phase will help them to stay realistic about their current financial situation. So, for a start borrowers should start assessing their present finances. This assessment is all about their income and their expenditures. Borrowers must ensure to list out every single expense to get a clear picture of how much they spend every month.

Once the borrowers complete their personal assessment of income and expenditures, they should start budgeting. Yes, budgets can help the debtors to save some money that is being spent on unnecessary purchases.  Online resources are very helpful to figure out effective ways of budgeting.

Borrowers should ensure sufficient allotment for basics in everyday life such as food, utility bills, groceries, house rent and so on. They should start applying their budget plans to see if those plans will benefit them in some time. Budgeting can help the borrowers to assess their current expenditures and potential savings.

  1. Reach to your creditors

When your budget plans are not helpful and you are trying hard to allocate sufficient funds for everyday expenditures then consider contacting your creditor. A creditor should know the reason behind untimely repayments. You can consult with your creditor and share your hardship with him or her.

Let them guide you to develop a personalized repayment plan that will be easier for you. Do not let your creditor contact debt collectors. It is very important to reach to creditors before they reach to debt collectors. There is no point in waiting on repaying the debts when you cannot handle the stress.

  1. Debt collectors cannot harass you

Unfortunately if your creditor has turned to debt collectors, keep in mind that they can only contact you from 8 am to 9 Pm. They cannot call or contact you outside this time frame as per the Federal law. If your employer prohibits any personal calls during work hours, debt collectors cannot contact you. The bottom line is debt collectors cannot use unlawful methods to collect debt amount from you. If you submit a written request letter to stop the contact, they should do so.

  1. Secured loan debt management

Borrowers’ collateral back secured loans. Hence, the borrower should contact the creditor before he or she resorts to foreclosure. Your mortgages and auto loans should be considered seriously because any failure in the debt repayment can instigate the lender to repossess cars or foreclosures.

To prevent foreclosures, in such situations debtors should contact their lenders and discuss practical solutions to debt have varied terms of conditions. Some may reduce a part of total debt amount while others may suspend the repayment schedule for a while until borrowers recover from their financial slump.

However, the borrowers must pay for the suspended period once they restart with the repayments. It is even possible that some lenders may personalize the repayment schedule to facilitate easy repayments. When lenders do not agree to any such terms, borrowers can ask for guidance from authorized housing counseling services.

  1. Debt relief

When debtors cannot strike a deal with lenders to accommodate the repayment plans, they can turn to debt relief processes like credit counselling or debt settlements. Debtors are advised to do some research to select a legitimate organization for debt relief. They must ensure that any consumers have not blacklisted the firm under scams or wrong promises.


Credit counseling can offer sound advice to debtors. They can offer guidance on budgets, debts and finances and so on. All of the counselors would ideally be well qualified to assist borrowers. However, borrowers should exercise caution about hidden fees and costs associated (if there are any) with the credit counseling services.

Once a credit counselor reviews debtor’s current financial situation, he or she may put the borrower on DMP (Debt Management Plan).  In this plan, credit counseling firm pays for the unsecured debts through the monthly deposits made by the debtor.

  1. Debt settlement

The debt settlement firms will contact your lender to discuss the loan settlement for a negotiated amount. These firms will ask the debtors to deposit some amount every month as deposit with them. These firms will use this money to pay off the settled amount to clear the debt. In this arrangement, the debtor will no longer be connected to his or her creditor directly. The debt settlement firm will establish all the transactions and contact on behalf of the debtor.

  1. Debt consolidation

When a borrower is struggling to repay the debt amount as he has one or many loans, he can consider debt consolidation.  In this arrangement, all the loans are combined into one single loan with a loan repayment structure. It is nothing but loan refinancing.

A borrower should consider debt consolidation options carefully to procure a better interest rate and repayment option.

Debt consolidation can be done through procuring secured or unsecured loans. Secured loans could be a home equity loan, auto loan, etc. Credit cards are classic examples of unsecured loans. Secured loans for debt consolidation can come with low-interest rates but borrower should remember that he or she would be required to use house or assets as collateral.  Debt consolidation through unsecured loans is rare. For such loans, a borrower should have an excellent credit and he or she will be given a no interest or low interest, introductory credit card offer for a certain period.


Debt consolidation can help:

  1. Debtors can reduce the expenditure on repayments by changing to lower interest rates. For instance opting for home equity loans with low-interest rates from credit card bills with a high-interest rate.
  2. The interest rate on a Home Equity Loan is tax exempted. Such tax exemption is not given to credit card bills.
  3. With some good research, borrowers can consolidate debts to a lower interest rate loan. And they can also try to get a better plan on closing charges that can save some money
  1. In case of debt consolidation through unsecured loans, the absence of collateral is one of the positive points. Many consider this as a good option even though the interest rates will be higher than the debt consolidation through secured loans.

How does debt consolidation affect debtors on a personal level?

Once a borrower decides to consolidate his or her debts into one single loan possibly with a lower interest rate he or she may feel better about their finances. Debt consolidation can provide relief from stressful financial circumstances. However, borrowers cannot bank on this feeling and take a fresh loan! They should be religiously paying out the new repayments and look forward to getting off the debt amount. Though debt consolidation gives an instant confidence boost, borrowers cannot take it for granted. They should be patient enough to better their financial prospects.


Debt consolidation is one of the most powerful ways of managing multiple debts. However, a borrower should consider all of his or her options before embarking on consolidating. Debt consolidation can benefit the borrower to get a lower interest rate and save money on monthly payments. Debt consolidation through secured loan interest rate is also tax deductible, saving more money on repayments.  A borrower should consider all the options before reaching a decision.