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Debt consolidation is a procedure where several unsecured debts having high interest rates are consolidated into a single and affordable monthly payment.
You can consolidate debt under the following circumstances:
Here are some debts which you can eliminate through unsecured debt consolidation program or service:
Debt consolidation is legal as long as the companies offering this program or service follows the FTC, state and federal rules. For example, the consolidation companies can't charge any fee before signing any contract with the consumer. Nor can they charge sky-high fee upon the cash-strapped consumers. Check out the FTC disclosure before enrolling into the consolidation program.
Whenever you enroll in any debt relief program, it has an effect on your credit rating. Enrolling in a debt relief program will not improve your credit score immediately, but as you continue to add positive information on your credit report, your score will start increasing.
Generally, the effect of personal debt consolidation on your credit score is better than that of bankruptcy. Unlike bankruptcy, a consolidation program does not destroy your credit rating. Rather it makes a positive influence on your credit score. If you're regular with your monthly payments on all your debts and do not incur any new debts, your score improves. A consolidation program will let you repay bills at a lower interest rate, thus making your monthly payments manageable. This will diminish the negative effects on your credit report, paving way to boost your credit score.
|1. Slashes interest rates on credit card debts||1. You may end up paying more, since you stretch the repayment term|
|2. Cuts down your monthly payments|
|3. Wipes out late fees and penalties||2. You may accrue more debts, if you don’t change spending habits|
|4. Helps you repay debts through an affordable single payment plan|
|5. Offers freedom from legal hassles and complications||3. You will still be liable for the debts|
|6. Helps you with budgeting and money tips in the counseling session|
|7. Gives professional advice to solve your financial problems||4. You may still get calls from creditors|
|8. Helps you get some relief from the continuous creditor calls|
|9. Can help you to avoid bankruptcy||5. You can only use it to pay unsecured debts|
|10. Puts an end to multiple payments|
Debt consolidation programs are services offered by professional corporations in order to help you consolidate several unsecured debt into a single monthly payment. The key purpose behind debt consolidation programs is reduction in the overall debt burden by cutback in the interest rates.
Check out the various stages involved in a debt consolidation program.
It is very hard to understand the complex state and federal laws governing the debt industry. Here, a debt consolidation attorney can help you understand the laws clearly. Moreover, a lawyer can also assist you in any legal issue that may appear in future.
Here are some of the benefits of a seeking debt consolidation advice from an attorney:
The consolidation process is the easiest and safest option to get out of debt. However, if you do not have any inclination to consolidate bills, then you may resort to other debt relief options which are listed below:
Debt Settlement: Debt settlement helps you overcome your debt by negotiating lower payoff amount with your creditors.
Debt management: In this plan, a credit counseling agency or the debt management company deals with the creditors to lower the interest rates on the unsecured debts, and develop an alternative repayment plan.
Bankruptcy: Bankruptcy should be your last resort to get out of debt. Bankruptcy damages your credit score by 200-250 points.
If you are knee deep in debt and thinking of filing bankruptcy, you should consider all your options. If your financial situation is not too terrible, then consumer debt consolidation is a good way to save yourself from harassing and threatening calls from creditors , and restore your damaged credit score gradually.
Check out the 6 consolidation tips which you should follow:
Often, consumers are not comfortable about consolidating debts on their own. In such a situation, it will be wise to get debt consolidation help from a professional company. Check out the following tips that can help to select and work with the best debt consolidation company in your state:
In recent years, debt relief industry has been flooded with scams. A lot of consumers get cheated by unscrupulous companies while looking for financial help. You should be particularly careful while trying to find online debt consolidation companies. Also, a company may not be a scam but the service it offers may not be satisfactory. Check out the following points to avoid consumer debt consolidation scams:
YES, you can do it through a debt consolidation loan (secured or unsecured) or through a balance transfer credit card.
There are nothing called free debt consolidation services or free debt consolidation programs. You need to understand and accept this fact. You'll have to pay for using debt consolidation service. You'll have to pay a fee after a written agreement has been signed, a payment plan has been agreed upon, and the creditor has received minimum one payment. You'll have to pay a fee on the portion of the money saved in overall. Even then, the consolidation companies can't charge an enormous fee for its services.
If you're thinking that "I will consolidate my debt by paying a small fee", then non-profit debt consolidation is a good option for you. A non profit debt consolidation company works just like a normal for profit consolidation company. They will communicate with your creditors and help you consolidate bills through one easy monthly payment plan.
Contrary to the popular notion, the non-profit companies do charge a nominal fee for the services provided by them to the consumers. These companies mainly thrive on donations made by various individuals and companies. If you're really interested in working with a non-profit debt consolidation company, find out if they have a 501 (3) (c) certificate from the IRS. This will help you know if it really is a non-profit consolidation company.