Debt Consolidation

If you have too many debts spread out, you may want to consider debt consolidation, which really is just what it sounds like. The process involves working with an independent company that will look at your financial situation, including your income and debts and advise you whether consolidating your debts is a good strategy. If you have credit card debt, unsecured loans or medical bills that you just can’t pay, this may be an ideal option.

If you work with a debt consolidation company, they will contact your creditors on your behalf, to negotiate a lower monthly payment amount, a lower interest rate or a reduced payoff amount. Of course, you can contact your creditors yourself to do this, but it’s more effective to have a professional company do that for you. Most credit card companies and lenders participate in the process; they would rather accept some of the amount due, rather than have customers pay nothing on the debt.

Once the debt consolidation company has negotiated with your creditors, they will contact you to let you know the results. One benefit of consolidating your debts this way is that you only have to write one check a month payable to the company handling your debt; they then distribute the funds to your creditors. The arrangement not only saves you money, but can save you time too. You can usually arrange to have the monthly amount taken out of your bank account, to avoid having to write a check and to ensure you make the payment on time each month. And accessing your account online, so that you can track your progress towards being debt free, is usually an option too.

Another big advantage of consolidating your debt is that by beginning a debt management program, it puts an end to all those letters and phone calls from your creditors asking you for overdue money. And consolidating your debt can actually help to improve your credit, as all your payments are now being made on time. The consolidation company usually negotiates with your creditors after all the accounts have been settled in full, to get those accounts reported favorably. You may also be able to benefit from general financial counseling too.

There may be other options for you instead of consolidating your debt, and you should get expert advice and make sure this process will work for you. Filing for bankruptcy is a huge step, but can eliminate you unsecured debts, such as credit card, store card and personal loans. Bankruptcy also stops your creditors from harassing you constantly for payments, although a bankruptcy can also stay on your credit report for up to 19 years and make it difficult to be approved for a car loan, credit card or mortgage.

Debt consolidation has helped millions of Americans, and if you are struggling with too much debt, it may be the solution you have been looking for. You can find information on companies that provide consolidation services online; their services are typically free or come with a small monthly fee.