Unsecured,
Personal Debt Consolidation: Answering Your Questions
What is
debt consolidation: Debt consolidation is what a
company does when it combines all of your debt into one low
monthly payment. Melody M__ was trying to scrape together
over 600 per month—not counting the mortgage and car
payment. Debt consolidation reduced her payments to 350 a
month, and she will be free of debt in just two and a half
years. You can do the same.
Doesn't
it accomplish the same thing to take a new, low interest credit
card, and combine all of your debt into one? No.
Debt consolidation is not more debt. A debt consolidation
company will negotiate with your creditors, reducing both
interest and principle. You will send the company one low
monthly payment, and they will pay off your creditors. You
become free from debt, not mired in more. Furthermore, if
you already have poor credit, another company may raise your
interest rate almost immediately after giving you the balance
transfer. Unfortunately, such tactics are not illegal.
What debts
are eligible for consolidation? Any unsecured debt
such as credit cards, gas cards, discount store cards, and
personal unsecured loans are generally eligible for debt consolidation.
Secured debt may also be eligible, but the program may be
slightly different; furthermore, you can't always combine
secured debt with unsecured.
Wouldn't
it be simpler to just file for bankruptcy and start over?
No. When you file bankruptcy, you create a negative situation
that stays with you for the rest of your life. While counselors
and attorneys that make their money from the fees may tell
you that bankruptcy only stays on your credit report for 7
years, the truth is, many loan companies, insurance companies,
and even employers will often ask if you have EVER filed for
bankruptcy. If you lie, the truth is likely to catch up to
you at some point. If you tell the truth, you have two strikes
against you before get a chance to prove that you have resolved
your finances.
How can
I be sure debt consolidation isn't just another scam?
When you , you will be matched with
a counselor from a legitimate, dependable company. We only
work with companies that have a proven track record.
How long
will it take to get out of debt? The average program
will get you out of debt in 2 to 4 years, depending on how
much you owe.
Can I continue
to use my credit cards? Many companies suggest that
you keep just one card, and that, if you can discipline yourself,
you use it for a limited amount each month and pay it off
in full. This way you begin rebuilding your credit as you
pay off the major debt. The best way to do this is to plan
your purchases. Leave your credit card at home except for
a planned purchase. That way you won't be as apt to
buy on impulse.
Other companies
want you to close all credit card accounts. In any case, you
are trying to get out of debt, so you shouldn't want
to use them.
What do
I do if the phone calls don't stop? The harassment
should stop, but it is a fact that some credit card companies
will keep calling you in an attempt to get an additional payment
from you, even though they are being paid by the debt consolidation
company. Your debt counselor will be able to give you a number
to call in the event that you continue to get troubling phone
calls.
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