Debt consolidation

in Debt Consolidation
Debt consolidation
occurs where one takes
out a loan in order to pay
off two or more existing
debts. Consolidating
existing unstructured
debt into one personal
loan may save on your
monthly outgoings while,
at the same time,
offering a repayment
discipline and clear end-
date to your debt.
An individual can join any
debt consolidation
program run by either a
private or a non – profit
organization. After
meeting with a certified
debt counselor one is in a
position to decide which
option is the best. The
options available are
debt consolidation
whereby all the debts
are lumped together and
paid off with one single
monthly payment
negotiated by the debt
relief agency. There is
debt consolidation loans,
debt management plan
and as a last resort
bankruptcy.
A Debt Consolidation
service, or sometimes
referred to as a "Debt
Management Plan", has
preset arrangements
with almost all of the
major creditors (mostly
credit card companies,
and some medical &
collection companies)
where the interest rate
is roughly
predetermined. On
calling a debt
consolidation company,
they refer to creditor
rate sheet and then give
a new payment based on
the lower interest rates
they have with that
respective creditor.
Typically this payment is
lower than what the
credit card companies
offer the public and more
often than not will save
you money monthly and
simplify consumer
payments if one has
multiple creditors.
One caveat of the Debt
Consolidation plan is that
one must cancel any and
all cards one includes in
the program. An
individual may wish to
exclude a card for
emergencies, depending
upon the company's
policies.
One benefit of the Debt
Consolidation Program is
if one is behind on
payments and getting
harassed by the
creditors. On making the
new monthly payment,
this will stop the
creditors from calling
and keep them satisfied
for the interim.
On extending the period
over which one repays
debt may mean that it
will cost him more
overall so make sure to
read the terms and
conditions carefully. One
must also think carefully
before taking out a
secured loan, securing
other debts against your
home. Remember, your
home may be
repossessed if you do not
keep up repayments on a
mortgage or other loan
secured on it.
The payments are usually
setup to last 4-8 years
and statistics have shown
that there is significant
fallout on debt
consolidation programs
due to unrest, situations
changing, and poor
customer service.
Commissions to expect
when shopping a debt
consolidation company
are roughly your first
payment you'd make
toward the program plus
a monthly administration
fee.
The monthly admin fee
ranges all over the
board, depending upon
the company you are
getting a quote from.
Some charge a flat fee
while others charge a
per creditor fee.
A Debt Consolidation
Program significantly
benefits those who have
very high interest rates
(above 18%), have more
credit card bills then
they can keep up with, or
would just like the
simplicity of one
payment to one company
for all of their unsecured
debt.