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Many people suffering from deep debt obligations often look towards debt consolidation as the answer to their problems. Sometimes the debt is so painful, they don’t always look at both the pros and cons of this debt solution though, so we’ll take a brief look here.

First though, what is debt consolidation? Simply put, it’s the process of combining all your debts into one. If you have ten debts of $10,000 each, then you have a total debt of $100,000. Some of those debts however, might be generating an additional 10% interest, while others are generating 15%-20% interest. In other words: Some of your debt is more expensive than others.

A debt expert will look at your monthly obligations with you, and then develop a program that will take all of your high interest rate credit card accounts and put them under one low interest loan payment. That sounds like a pretty good thing. The end result of this process is that you eliminate the many high service charges you were paying every month, and you replace them with one low service charge for your consolidation loan. This frees up extra cash every month that you can use instead of credit to purchase the things you want and need. Using cash instead of credit helps to increase your credit rating, and that goes a long way to helping you get the things you want out of life like a good job and financing for a large purchase.

Top-rated firms encourage potential clients to ask questions. These companies know that the process of confronting creditors may cause anxiety. FICO scores may initially drop before beginning a sustained period of growth. Charge privileges may terminate temporarily until developing a solid history of on-time plan payments. The best companies understand these concerns and provide time-tested solutions for almost any financial challenge. The greatest benefit of using an experienced debt consolidation company is the immediate help available. Monthly payments drop dramatically within a month. Advice, assistance and encouragement are a phone call away.

Good and Bad Credit Debt Consolidation Information

Debt consolidation services work with good and bad credit people. Some agencies have strict requirements. For example, they require applicants to have at least $4000 in debt, and be at least 30 days behind in their payments. On the other hand, several other agencies are eager to work with individuals who have good credit.

When you apply with a debt management service, you will have to submit detail information pertaining to your credit and debt. For example, you will have to photocopy and fax credit card statements, medical bills,
personal loan statements, etc. You do not have to include all debts in the consolidation. Thus, if you have a vehicle loan, you can continue making regular payments without the assistance of a debt consolidation service.

When you make your appointment with a debt counselor be sure that you bring all your bills so they can take care of all the issues no matter how small. Make sure you fully understand the terms and conditions of the repayment plan as well as any fees that are associated with this plan. Many people believe that debt counseling is free, this is not correct.

Solid loan terms that work for you

The goal when you go through debt consolidation is to turn some old, bad credit card debts into something that’s a little bit more manageable. That means you should be paying lower interest rates, you should have lower overall payments, and your loan length should suit your needs. These are things that a solid program will talk with you about. They will figure out exactly what you need in order to get yourself out of debt. Without this information, it would be nearly impossible to outfit any person with a plan that could effectively change their debt situation. The best programs do that and it makes all the difference.

When a loan is considered to consolidate debt, it is imperative that the underlying issue be solved as well. For most citizens, the problem is that they spend more money than they make. This is a simple concept, but it is not easy to overcome this habit. It is deeply rooted in our culture and society from the individual person all the way to the government itself.

Some credit and debt counselors, however, hold that any sort of debt consolidation is a bad decision. Unfortunately, it is a fact that an estimated 70% of Americans taking debt consolidation loans land up with equal or worse debt worries within a couple of years.

In this light, it is better to consult a debt counselor for long-term debt solutions. The task of professional counselors is to negotiate with your creditors, making them agree to lower interest rates, and to guide you on effective debt management simultaneously. There is just one dark side to using counselors your credit report gets slightly affected because, technically speaking, you are not paying your bills as per the original agreement.