Debt consolidation program – How it helps you repay debts with ease
If you are in trouble managing your unsecured multiple credit card debt, then opting for debt consolidation would be a good alternative for you. Debt consolidation programs basically help you in combining all your debts that does not have collateral, into single payments that you have to make on monthly basis.
How does a debt consolidation program work?
In a debt consolidation program, apart from consolidating credit card debt, you can also opt for consolidating utility bills, legal and medical bills, service charges, charge cards like gasoline and departmental store cards and other types of unsecured debts. There are a number of companies that offer you debt consolidation programs that include relevant information and counseling on how you can manage your finances better.
When you enroll in a consolidation program, a consolidator, on behalf of the consolidation company, will assess your financial situation and decide upon a monthly payment, which you need to make to the company. He/she will also negotiate with your creditors to reduce the interest rates on your credit card debt so that it becomes easier for you to repay the outstanding balances relatively fast. After receiving your monthly payment, the consolidation company will distribute the amount amongst your creditors as per agreement, on your behalf.
What are the advantages of a credit card debt consolidation program?
The advantages of a debt consolidation program have been elucidated below.
1. Reduction of interest rate – A debt consolidation company will negotiate with your creditors to lower your interest rates substantially. Most of the creditors agree to such terms and conditions so that you are able to pay back the debts in full.
2. Single monthly payment – You have to make a single monthly payment to the consolidation company who would then use this money to pay your multiple creditors.
3. Professional help is rendered – The debt counselors are professionally experienced individuals; hence they will be able to deal with your creditors better.
4. Quick and effective way out of debt – You can repay your debts much earlier than the time you would have taken to repay the outstanding balances in the normal repayment plan. They also help you save a lot of money that would otherwise be used on interest payments and penalties.
What are the disadvantages of a credit card debt consolidation program?
Here are some disadvantages associated with paying back debts with the help of a consolidation program.
1. There might be some creditors who would not agree to the terms proposed by the consolidation company and not reduce the interest rates on your debts.
2. The responsibility of your debts is still upon your shoulders and you need to keep a regular check on the statements.
Thus you can see a credit card debt consolidation program has its fair share of drawbacks to go with. However, you may find the advantages to be far greater. In any case, it would be a sensible decision on your part to go for a debt consolidation program when your overall credit card debt is quite high and unmanageable.
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