How a Debt Consolidation Company Works

25 May

How a Debt Consolidation Company Works

Are you struggling keeping track of your credit card bills, mortgage and other loans?  Are you finding it hard to make on time payments or sometimes you’re forgetting to settle them? If so, then you may be a candidate for the service of a debt consolidation company.  But before jumping into the conclusion of seeking help from one, you should know what to expect and if it is suitable for your situation. Get more guidance by reading below.

What’s A Debt Consolidation Program?

This service is not news at all; in fact, many people have been taking advantage of it for many years.   The concept is rolling your debts into one account so that you will be able to make a single monthly payment instead of having to pay multiple credit card accounts. The service is offered by an organization or company that forwards the monthly payment to the creditors.

debt consolidation

However, the term is sometimes interchanged with other tools. For example, a debt consolidation loan is different from a program because it is a new credit account used in paying off other loans.  So even if the two can produce the same result for you, they do not work in the same manner.

All debt consolidation companies aim at helping you make a single payment, not multiple payments monthly.   If you’re getting debt consolidation loan, you may be able to pay for a lower interest rate than you would with other debts.

Both a debt consolidation service and loan also helps you end up in taking longer time to pay off the debt. 

The difference between a program and a loan is that the latter is used in transferring your debt to the new credit or loan. On the other hand, a debt consolidation program is a type of service that helps in paying off the debts to the creditors.

Debt Consolidation Loan

If you qualify for debt consolidation loan because you have enough disposable income to cover the payment and you have a good credit worthiness score, then the better option may be a loan than a program.  Now before applying for a loan, you must compare the fees available from the different loan companies, and from there, you must decide which one offers you the best solution.

Debt Consolidation Program

It helps you manage your debt with multiple creditors. The service is offered by a for-profit company or a credit-counseling agency that can help you create a plan to eliminate debt within five years in most cases.

The first step to qualify is to have counseling with one of the staffs who will review your financial situation and budget. Later, they will determine if they can help or not, and if they can, they will come up with a repayment plan that works for you. 

Using the program, you may have to pay a setup fee and monthly fees. Compare different organizations and weigh your options well before picking one of them.

Ready to get help from a debt consolidation company?

There you have our guide on how a debt consolidation program or loan can affect your credit score as well as a brief overview about a debt consolidation loan and program.  Hope you picked up something and decide better about which alternative can suit you best today!

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