Is Consolidating a Good Thing?
In an ideal world we would all be able to handle our expenses with no help from anyone. We would only have the amount of debt that we could easily pay back. Unfortunately, we do not live in an ideal world and when the unexpected happens sometimes we end up in over our heads financially.
Debt consolidation is a solution sought out by many debtors who are in too deep. This can be achieved by transferring all debt to a low-interest credit card, or by taking out a home equity loan. There are also debt consolidation or credit counseling services that consumers can utilize.
What can Credit Counselors Do?
A credit counselor will review the debtor's situation and propose a payment plan that is reasonable for debtor and acceptable for the creditor. The debtor pays a monthly payment to the agency and the creditors receive their agreed upon amounts from the agency.
Put the Experts to Work for You
Debt consolidation agencies can sometimes get your interest rates lowered, stop late fees and penalties from mounting and come up with a repayment plan that will work with your budget.
Not Always a Win Win Situation
There are some obstacles that may be hard to overcome. While credit counselors work hard to negotiate with your creditors they are not miracle workers. The creditors expect to be repaid and they are only going to compromise to a point. If you are really in way over your head the negotiated figures may still be a lot more than you can handle. If that is the case debt consolidation will not work for you.
Also while you benefit from the debt consolidation services you also pay for them. If you are already in over your head this extra expense tacked on top of all your other debt may be more than you can handle.
There is also the negative effects that credit counseling has on your credit scores. This is reported to the credit reporting agencies and it shows on your report until you have paid off the debt and then for some time after that. The system is very similar to filing Chapter 13 bankruptcy where an agreed upon payment plan is established. Many creditors view it as the same and are hesitant to extend credit to someone who has been through credit counseling.
Debt consolidation is a solution sought out by many debtors who are in too deep. This can be achieved by transferring all debt to a low-interest credit card, or by taking out a home equity loan. There are also debt consolidation or credit counseling services that consumers can utilize.
What can Credit Counselors Do?
A credit counselor will review the debtor's situation and propose a payment plan that is reasonable for debtor and acceptable for the creditor. The debtor pays a monthly payment to the agency and the creditors receive their agreed upon amounts from the agency.
Put the Experts to Work for You
Debt consolidation agencies can sometimes get your interest rates lowered, stop late fees and penalties from mounting and come up with a repayment plan that will work with your budget.
Not Always a Win Win Situation
There are some obstacles that may be hard to overcome. While credit counselors work hard to negotiate with your creditors they are not miracle workers. The creditors expect to be repaid and they are only going to compromise to a point. If you are really in way over your head the negotiated figures may still be a lot more than you can handle. If that is the case debt consolidation will not work for you.
Also while you benefit from the debt consolidation services you also pay for them. If you are already in over your head this extra expense tacked on top of all your other debt may be more than you can handle.
There is also the negative effects that credit counseling has on your credit scores. This is reported to the credit reporting agencies and it shows on your report until you have paid off the debt and then for some time after that. The system is very similar to filing Chapter 13 bankruptcy where an agreed upon payment plan is established. Many creditors view it as the same and are hesitant to extend credit to someone who has been through credit counseling.
About the Author:
Tire of struggling to keep up with your credit card balances? Get some simple methods of how to pay off credit cards faster on the Debtopedia website. Get a free copy of my report "Secrets Of Credit Card Debt" at http://www.debtopedia.com
posted by Credit Counseling at
2:03 AM
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