Frequently Asked Questions About Debt Consolidation
We Answer Your Questions
The more informed you are as a borrower, the better the chance that you will succeed with your efforts. So many borrowers get locked into the trap of spending because they lack a solid understanding of the fundamentals of money and effective repayment options. For this reason, we have provided a list of some of the most important and frequently asked questions our visitors pose when they consolidate. Before you select a credit debt program, make sure you review these questions and answers carefully so you are well-informed going into the rebuilding process.
How do collections agencies work?
When a creditor gives up on collecting a delinquent amount, the creditor sells the debt to a collections agency for a reduced price. For example, a creditor might sell a $5,000 debt to a collections agency for $2,000 then writes off the difference as a loss on their income taxes. At this point, the collections agency owns the debt and is responsible for getting the borrower to reimburse them on time.
One of the reasons why our method works is because collections agencies are usually willing to accept a lower payment amount than the original debt. This is sometimes referred to as a debt relief settlement and is typically negotiated by your company. Collections agencies will accept reduced amounts because they almost always still make a profit. For instance, continuing with the example above, if the collections agency accepted a payoff amount of $3,000 on the $5,000 debt, they would still make a profit of $1,000.
Why should I choose this method over bankruptcy?
Bankruptcy will have devastating effects on your credit score. Most bankruptcies will linger on your report and drag down your rating for seven to ten years. This means you will be responsible for outrageous interest rates for up to ten years if you can qualify for borrowing at all. A damaged rating can also lead to high insurance rates and lost job opportunities.
Debt consolidation, on the other hand, allow you to become free of much of what you owe without ravaging your rating in the process. These programs help you tackle your expenses responsibly and affordably without discharging them in a bankruptcy proceeding. Moreover, this type of program can actually help you improve your credit rating. Consolidating debt will help you pay on time consistently, and you will see the balances on your accounts dwindle as you make progress. On-time reimbursements and lower balances will both help elevate your rating after you tackle the expenses, whereas bankruptcy damages your score for years to come.
What are my credit card options?
Most of our programs specialize in credit cards. The providers tend to be more flexible on rates than others, so it is easier for consolidation services to arrange a workable debt solution with them. If you decide to consolidate professionally, your company will work to try to improve your standing. Ideally, your part will become more reasonable, allowing you to become debt free more quickly.
Another option is to use a loan or a balance transfer to take care of your cards. With a balance transfer, you consolidate debt by moving the balances of one or more cards onto one with better interest rates. The improved interest rates then enable you to pay off the balance more quickly. Secured or unsecured loans can also offer solutions for cards by allowing you to pay off your balances with a lower-interest loan from your bank.
What is unsecured vs. secured debt?
These two types differ in whether they are associated with physical property. Unsecured debt is not tied to a piece of property. They include credit cards, medical bills, and some types of payday loans. Secured debts, on the other hand, are attached to a piece of physical property, such as a house or a vehicle. Secured debts include mortgage loans, car loans, and personal loans that require collateral. Typically, the latter has more reasonable interest rates than the former because the lender faces less risk.
Most services like ours will only accept unsecured debts. They are much more difficult to consolidate and often don’t need to be consolidated in the first place because their interest rates are already low. Unsecured lenders tend to be more compliant with organizations such as ours because, unlike secured lenders, they don’t have the option of seizing property if the borrower fails to pay. As a result, these creditors are more willing to negotiate and cooperate with consumer debt management companies. Check out other tips and tricks.
How can I deal with creditor harassment?
We can refer you to a service that will help you put an end to harassment. The best way to stop harassment is to pay your bills on time, and this type of plan will help you do just that. This service will work on making your monthly payments more affordable so you can pay on time and pay down your balances rapidly. Once your creditors see that you’re holding up your end of the bargain, they will likely stop harassing you for payments.
Another advantage of getting your finances back on track is that you will not have to deal with your creditors directly after the consolidation takes place. You will send your payments to your creditors through the program, which then distributes the money to your individual lenders. As long as you keep up with your payments, your creditors should have no reason to harass you anymore.
What is nonprofit debt help? Are you a nonprofit?
Non profit consolidation usually refers to some type of counseling agency that assists consumers with budgeting, paying down bills, and dealing with creditors. Strictly speaking, credit counseling agencies do not provide traditional consolidation services. They can inform you of your options and offer counseling, but they do not actually consolidate your accounts for you. In other words, there really is no such thing as a non profit debt consolidation company.
Debt Consolidation is not a non-profit organization. All of our partner companies are for-profit services. Although for-profit services tend to charge higher prices than non-profit counterparts, they also tend to get better results for their clients. For-profit companies are more aggressive in dealing with your creditors and securing the most affordable payments possible for you.