Using Debt Consolidation to Achieve a Debt Free Life
Debt consolidation is one tool used to help people today who are over-burdened with credit card bills and mounting home debts. Debt negotiation services are provided to individuals and businesses who are now dealing unsuccessfully with mortgage companies, banks, and credit card companies.
Purpose
Debt consolidation is usually sought by people who owe debts to several creditors. Usually an individual or a business for example may owe past-due balances on multiple credit cards and/or trade creditors.
Debt consolidation refers to combining those debts into one manageable payment that is less than the total amount you owe. In debt consolidation, you make one monthly payment to one company, which in turn pays your creditors.
If you can raise or borrow enough cash, you can negotiate with your creditors to accept a lump sum payment that is less than the total amount you owe.
They accept debt negotiation because we convince them they will not collect the entire balance and that they should take a discounted amount now, rather than waiting and taking their chances.
How it is Done
Debt consolidation specifically is the act of combining groups of your debt together. It is the act of consolidating all your debts into one payment. This usually is accomplished by taking out one loan to pay them all off at once. Then, one payment is made on that one loan.
This is a completely separate approach to the use of debt management plans, which do not involve borrowing any money. Debt settlement is one case in point in that it involves negotiations to get a debt reduced to a more affordable amount and no money is borrowed to pay it off.
Expected Results
Oftentimes debt consolidation companies can reduce debts by up to 70%. At the very least, oftentimes in the process debts are settled at about half the amount originally owed.
This leads to another point. Sometimes other options are considered besides consolidation. If debts are settled at a low enough amount then consolidation may not be needed and may also not be the answer.
Warnings
You should be very careful when seeking debt management help. Many companies are out to defraud you in many different ways and it is important for you to learn of this. This is something you should be aware of before it’s too late.
The following are signs of debt management and debt consolidation frauds:
- If you are told that a debt consolidation action will not show up on a credit report, but then find out later it affects you more than even a debt settlement
- When you are told you must pay at the same interest rate as before, but then are forfeiting some of your money to debt management company commission fees
- When a company charges a flat rate versus a commission percentage
- If the company tries to vouch for credibility in some other way other than the Better Business Bureau (although the Chamber of Commerce and Dunn and Bradstreet are up there)
- If you are told that supposedly all debts can be paid off in 1 to 2 years, but are not warned about changing interest rates, bank merges, or repayment policies
A Small Guide
If you are looking for debt management services you can help people out of their credit crunch. Many reliable industry names can help you out if you are in a dire financial situation.
However, you may need to know what companies can offer what services. This is important for anyone who may be stuck having to pay off credit cards or personal loans or any other debts they cannot pay.
- Company reputation
- Company credentials
- Past client and staff interactions
- Estimated savings guarantee
- Five-year BBB membership
- Credit card maintenance assistance
- Guarantees of savings in writing
- History working with touch creditors
Keep on the lookout for companies who have the above-mentioned signs of credibility. Your main objective will be to offer a practical debt solution. It is not one that is going to make your situation worse.
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