What is debt consolidation? It’s the process of combining all your unsecured debt into one monthly payment. Unsecured debt can include credit cards, medical bills, and personal loans.
ACCC has the facts on debt consolidation.
What is Debt Consolidation & How Does it Work?
Debt consolidation is a viable option for consumers who are struggling to keep up with multiple payments and multiple due dates. With debt consolidation options, you make one monthly payment on the day that works best for you. Therefore, you don’t have to worry about multiple payments and due dates.
Debt consolidation helps you become more financially organized. In addition, you are able to pay down credit card debt, faster. You will also benefit from a possible reduction in interest rates in the process. Some of the other benefits of entering into a program are waived fees, ending collection calls, a reduction of finance charges and over limit fees, and paying off your debt faster.
How Does Debt Consolidation Work?
It’s important to do your homework before you enter into an arrangement to consolidate your unsecured debts. In particular, there are two pieces of debt consolidation information to carefully consider:
- Information about the specific consolidation program
- Information about the company that you’d be working with
Let’s look at them in a little more detail.
Information About the Specific Consolidation Program
- Does the consolidation program meet your obligations to creditors? Is it an attempt to have you pay less than you owe? The latter type of debt settlement solution is best to avoid since it may severely harm your credit rating, among other risks.
- Does the consolidation solution require you to borrow money? Think long and hard before taking out a loan. This approach may just leave you deeper in debt than you are now.
- How much does the consolidation program cost? Insist on getting this debt consolidation information up front, in clear terms.
- What kind of support will the program provide you, to help you stay on track?
Information About the Debt Management Company That You’d Be Working With
- How long have they been in business? Look for a provider with seven to ten years of experience, at least.
- Are they a for-profit or non-profit organization? Non-profit debt relief counseling agencies are more likely to provide you with helpful services at the lowest possible cost.
- Are they a reputable business? Check for membership in leading trade organizations like the National Foundation for Credit Counseling (NFCC). See what kind of grade the provider gets from the Better Business Bureau (BBB).
Once you have this information in your hand, you are set to start your debt consolidation journey. Organizations such as American Consumer Credit Counseling employs certified credit counselors to help you answer, “What is debt consolidation?” and more.
If you’re struggling to pay off debt, ACCC can help. Schedule a free credit counseling session with us today.
