Consolidating debt procedures

02-Jul-2019 15:31

With debt settlement, you are telling your creditors “Sorry, I can’t pay the entire amount I owe, but I can pay a fraction of it to you right now if you’ll cancel the debt.” As you can imagine, doing debt settlement will hurt your credit score pretty significantly.It’s not something you should do before considering other options.People have saved thousands by consolidating higher-interest debts using a single, personal loan, this will not negatively impact your credit.Check Your Rate Now Of all the options available to people who need debt help, debt consolidation is one of the most mild, least drastic options.So unlike debt consolidation, you still have the same debts (with the same balances) but you negotiate for lower interest rates and, if necessary, lower monthly payments.People usually go to a “credit counseling” non-profit organization to get help starting a debt management plan.Instead, the debt settlement company waits until you have accumulated enough money in your escrow account to make a lump sum offer to settle your debts. Once you have enough money in the escrow account, the company will begin to contact each of your creditors (the banks and credit card companies that you owe money to) and attempt to negotiate a settlement where you pay some percentage of your outstanding balance as a lump sum in return for having the debt canceled. For example, if you owed ,000 on your Bank of America credit card, it might be settled for ,000. If the settlement offers are not accepted by your creditors (or very few of them) you will be months or years behind on your payments.

Debt consolidation entails taking out a new loan (called a debt consolidation loan) to pay off your existing debts.Either way, the first step is to start by contacting a credit counselor from among the ones recommended by the Department of Justice or by using the National Foundation for Credit Counseling website.if you want to do a debt management plan with a credit counselor, ask them these important questions before you begin.The term “consolidate” means to group several things together into one, which makes sense, since debt consolidation groups all your existing debts into a new loan.This helps to streamline your payments – you’ll pay just one bill every month instead of many.

Debt consolidation entails taking out a new loan (called a debt consolidation loan) to pay off your existing debts.

Either way, the first step is to start by contacting a credit counselor from among the ones recommended by the Department of Justice or by using the National Foundation for Credit Counseling website.

if you want to do a debt management plan with a credit counselor, ask them these important questions before you begin.

The term “consolidate” means to group several things together into one, which makes sense, since debt consolidation groups all your existing debts into a new loan.

This helps to streamline your payments – you’ll pay just one bill every month instead of many.

The Bottom Line: You should only do debt management if you are having trouble paying your current bills and need a reduction in monthly payments in order to be able to do so.