Debt consolidation is a booming industry. It is important to know what to look for when trying to find a legitimate debt consolidator. The best debt consolidators are not necessarily the ones who make the boldest claims. The search for legitimate debt consolidators and consumer credit counselors must be accompanied by the right questions and a keen ear for the right answers. Know what types of debt consolidation services are available.
Significance
Debt consolidation can be a useful tool to bring under control debt that creates hardship in one's life and wreaks havoc on one's credit score. Debt consolidation is supposed to save the debtor money. The consolidation company leverages down the client's late fees and interest rates and sometimes can negotiate the principle. The purpose of these maneuvers is to save the debtor unfair charges and to repair bad credit scores. The adage still applies, however. "If it sounds too good to be true, it probably is." For consumers, it is crucial to know what questions to ask when interviewing potential debt consolidators. An excellent resource is the Federal Trade Commission's web page on debt consolidation (see Resources below). Here people who need help will find the exact questions to ask and what to look for in a debt consolidation mechanism.
Types
When one is ready for debt consolidation, the last thing one needs is to pay for inadequate service or, worse, no service at all. There are harmful ways to try to control debt and there are helpful, smart ways to do it. Some of the harmful types of debt consolidation include using credit cards to pay other debt. This is a feedback loop that benefits only the credit card company. Another dark avenue is high interest loans. Often, once a person has trouble paying her bills, she will try to get a loan. With weakened credit score in hand, she is paying a lot of money to pay a lot of money. Do not lose heart. There are helpful options available, if one qualifies. The Federal Trade Commission recommends certified consumer credit counselors who can review one's entire financial situation and offer coherent advise. Another option offered by the FTC is a home equity loan, keeping in mind that one's house can be compromised if the bills are not paid.
Function
The way that a reliable and legitimate debt consolidator saves a debtor money and helps to repair a credit score is by negotiating with each of one's creditors. The total negotiated payments are bundled and a payment schedule is arranged between the consolidator and the debtor. Then the debtor pays into a trust account that pays out to the consolidated creditors on a monthly basis. In addition, a certified financial counselor helps the debtor to understand his financial situation and devise a plan for a successful future. The debtor knows what to expect and how long the process will take. This empowers the debtor, laying a foundation for a happier financial future. The consumer credit counselor also helps her client to understand how to make healthy financial choices going forward.
Features
One of the hallmarks of helpful debt consolidation is reasonable fees. With a legitimate debt consolidation organization, there will be no surprises and a debtor will not be driven deeper into debt with the consolidator's so-called help. Legitimate debt consolidators do not promise clients that they will be debt-free in some unreasonably rapid period of time. One has the right to feel that the debt consolidation process covers all of one's financial issues and offers realistic options for the future. Once payments are negotiated, the debtor cannot use credit cards nor apply for any form of credit until the payments schedule is finished. In the worst cases, an honorable debt consolidation organization might recommend bankruptcy, but that is for extreme situations, and at least the consolidator will not make promises to drain the client of more money and hope.
Prevention/Solution
The best debt consolidators are those who can negotiate with creditors to waive late fees and interest in exchange for a reasonable monthly payment that covers all of one's credit bills. Home equity loans, balance transfers or any other financial option such as finance companies or credit card companies market as viable solutions are not solutions. The point is to get out of debt in a financially responsible and timely manner. Debt consolidators that extend one's debt are not the solution.
0 comments:
Post a Comment