How Do Debt Consolidation Services Work?Debt Consolidation Overview Debt consolidation refers to the process whereby debt payments from a number of unsecured debts are consolidated in to one bill and, hence, one monthly payment. This process is primarily used to consolidate credit card and other unsecured debt, especially if the debt is at a high interest rate. Benefits include lower interest payments, a stream-lined budget, and only having to remember one payment per month. For all debt consolidation, it is imperative to remember to use this strategy to pay down debt, not simply accrue more debt in the future.
Debt Consolidation Benefits The benefits to debt consolidation are numerous. First, there is peace of mind. Many financial speakers, such as Suze Orman and Dave Ramsey, talk about debt as slavery. Part of this slavery is having to sit down and pay bills every month – remembering to pay multiple credit cards and department store cards (along with other bills like car payments, insurance, housing, and ultitilies) can make even the calmest person stressed! By consolidating debt, you will only have to make one payment per month to pay down your balance. The peace of mind in knowing that you aren’t forgetting a bill or a due date is very beneficial. Second, debt consolidation services can offer you a lower interest rate than you may already have. Agencies can also assist in getting late payment or over-the-limit fees (often at $39+ each!!) waived. These benefits are the most financially rewarding and can help shrink both your monthly and overall interest payments. Why pay more interest than you have to? This is where a credit counseling agency can be very beneficial. Consumer Credit Agencies The best option availale for debt consolidation is to use the services of a consumer credit agency. These agencies are often non-profit organizations dedicated to helping consumers out of crippling debt. Through this arrangement, the agency will make arrangements with your creditors; you will send in one payment to the agency and this payment will be divided among your creditors. Most importantly, these agencies can negotiate lower interest rates and, often, can help you get late payment or over-the-limit charges waived. Most agencies will set you up on a budget plan to get totally out credit card in 24, 36, or 60 months, depending on your personal situation. This process can also help you prepare your credit score if you have fallen behind on existing payments.
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