Debt consolidation is legal as long as the companies offering this program or service follows the FTC, state and federal rules. For example, the legal debt 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.
|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|
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 through debt consolidation services and do not incur any new debts, your score improves. A debt 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.