Guide To Free Debt Consolidation
by: Mansi Gupta
There are innumerable people under debt who are plagued by the pressure of
paying back their dues to collection agencies. This calls for consolidating
their debts. Debt consolidation is a process that saves an individual from
handling large debts of multiple creditors thru debt management program.
The debt management program helps to convert the credit cards, medical bills
and utility bills debts into monthly manageable payment and also reduce the
monthly payment.
In this regard several firms have come up who hire professional debt
consolidation staff who first analyze the present debt amount and then negotiate
a payment plan with the creditors to lower the interest rates and thereby reduce
the debt amount. Late fees, penalties and hidden taxes are also waived off at
times. The revised consolidated debt amount is then divided into easy monthly
installments that make the repayment plans much easier.
The benefits of a debt consolidation program are:
• Elimination or reduction of past interest and penalty: In case of unsecured
dues such as credit card dues, the amount due becomes much more than amount
borrowed over a period of 4-5 years due to the interest and penalty charges
levied on the amount over the due course of time. A debt consolidation program
eliminates the interest and penalty charges on the amount borrowed. Now one
needs to pay back only the borrowed amount.
• Consolidation of Credit Cards: Since people own more than one credit card
at any point of time, they need to keep a track of payment of each credit card
bill every month separately. In a debt consolidation programs all the accounts
are consolidated into one account. So that only one bill is paid against all the
credit card statements each month.
• Reduction of Average interest rate on the total amount: In case of
different credit cards the interest rate varies from 8- 18%. When one goes
through the debt consolidation program the interest rate on the consolidated
account is much lower. The consolidated account might have an interest rate of
only 8%. So the average interest rate for the unsecured debts is reduced
significantly.
• Acquiring a payment plan depicting your payment abilities: With the debt
consolidation program, the consultant first understands the persons needs and
restructures the payment plan which suits the current payment capability of the
person.
• Individual becomes debt free sooner: All the above benefits reduce the
payoff time and thereby enable the person to repay the debt faster and easily.
With in months this makes the person enrolled in the debt management program to
be in control and debt free. In due course of time people are able to be fully
debt free and earn better credit scores.
The increased demand for debt consolidation services has created opportunity
for unscrupulous telemarketers. They exploit individual debt problems to their
advantage and damage many people's credit in the process. A poor debt
consolidation plan can leave one in worse shape than one was before the
consolidation of debts.
It is therefore extremely important that one should understand the different
types of debt consolidation services available today before rushing into
blindly.
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