Debt consolidation counseling is a process used by more and more Americans wrestling with seemingly insurmountable debt problems. Counselors explain that the process is about combining several different loans into a single payment so that someone with debt will only make one monthly payment for all the money owed.
Consolidating multiple loans into one can be useful for consumers who find that either the payments for multiple bills or the number of bills are too much to handle to the point that they are considering bankruptcy.
When someone consolidates debt, it’s possible that interest rates on current loans can be reduced making it easier to get personal finances back on track. Counselors believe that debt consolidation can provide relief to the increasing number of people swamped with debt because payments are usually more manageable.
By the end of 2010, total U.S. consumer debt was about $2.4 trillion – about $7,800 per person. As a result, around 2 million to 2.5 million Americans use debt counselors every year as an alternative option to bankruptcy.
A number of debt consolidation counseling services across the United States work with consumers and their creditors to minimize how much consumers need to pay monthly. Through debt consolidation, consumers can often avoid late fees and other charges that usually pile up when they are unable to keep up with rising bills.
The certified debt specialists at Debt.Org can help you decide which debt resolution strategy is right for you. Call (877) 359-8091 for a free consultation.
Should You Consider Debt Consolidation Counseling?
Debt consolidation is a smart option for people having trouble making regular payments on monthly bills. If you decide to consolidate your loans, you will usually work with a third party who will consult with you about your debt.
Debt consolidation companies offer counseling services that can help people regain control of bills – typically ones incurred from credit card purchases, department store card or other personal loans. Balances from these bills often come with high interest rates, making it more of a struggle to pay if you already feel like you are about to fall behind.
A debt consolidation company can arrange it so that you have a longer time period to make your payments. And in some cases, debt consolidation counseling companies can cut your overall payments considerably.
A debt consolidation counselor will work with your creditors to arrange a reduced payment that you can afford. This can greatly aid consumers dealing with piling debt because you will have to give less each month to pay off debts, which means you will have more cash available for other immediate expenses or to add to savings.
How Does Debt Consolidation Counseling Work?
When you meet with a debt consolidation counselor, you should have all your bills collected so that the counselor can thoroughly review your debt. The counselor will take a look at the amount of debt you have and develop a plan to move forward. The counselor will figure out with you how much you owe and what you are able to pay each month.
Once you agree to a program with a counseling agency, you will stop sending checks to each of your creditors. Instead of making a number of payments, you will make one monthly payment directly to the counseling agency that has worked with you on your debt program.
The debt consolidation counseling agency then negotiates with your creditors and makes payments that you owe on your behalf. These payments are usually lower than the amount you would have to pay if you tried to continue to pay your creditors individually.
Creditors are in favor of helping people pay back their loans because they risk losing all the money owed if you decide to file for bankruptcy. Creditors will see that you are looking for a solution to pay off your loans by using a debt consolidation counselor.
Is There A Cost To Use A Debt Consolidation Company?
It’s common for debt consolidation companies to charge fees for their services as they help you get you sort through your debt. These fees vary depending on the company.
Initial consultations and a financial analysis are generally free. The counseling service can provide a quote before you start working with them, so ask if all fees are included in your quote.
When you look for a plan to manage your debt, a good guideline to determine whether fees are reasonable is to find a plan that has enrollment fees under $50, monthly fees under $30 and a 9 percent interest rate or less.
What Else Can A Debt Consolidation Company Offer?
Several debt consolidation counseling companies offer an array of additional services to help you with your financial circumstances. These can include classes on debt and workshops on savings and other related topics.
They can also help you establish a financial budget to help you move forward and avoid falling back into debt. A strict budget is important because it will prompt you to limit your spending and you will be less tempted to spend more than you have available. If you want to be successful with your current debt plan, you need to make sure that you don’t end up back in debt in the future.
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