8 Benefits of debt consolidation - Why you should consider it
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Are you looking to reduce your debt payment and save in interest costs? Debt consolidation program can help you lower your interest rates and cut down your monthly payments. This article helps you to explore the 8 debt consolidation benefits.Check out the following sections to know about the debt consolidation benefits in detail and find out how the community helps you:
: You can reduce the interest rate on your bills and debts through negotiation with creditors. If you approach a debt consolidation company, they'll negotiate on your behalf. Your creditors (or collection agency, if the debt is sold off) will restructure payments so that you can manage your debts better.
For example, if you have three credit cards at interest rates of 18%, 12% and 9%, then the average interest rate at which you've been making payments is:
(18% + 12% + 9%)/3 = 13%
Say, after consolidation, the interest rates become 13%, 10% and 7% respectively. Now the average rate of interest becomes:
(13% + 10% + 7%)/3 = 10%
Now if you owe $5000 on your credit cards, then the reduced rate of interest would save you $150 per month.
Debt repayment plan
: You'll get a debt repayment plan from your creditors or collection agencies. The new plan with reduced interest rates will help reduce your bill payments so that you can afford to pay off at least the principal balance in full along with some interest.
The plan is developed such that you won't default while in a debt consolidation or bill consolidation program. You'll be able to save dollars and organize your finances better.
Single monthly payment
: Consolidation program requires you to make a single monthly payment towards your bills and debts. That is, you make one payment to the consolidation company every month. The company will divide and disburse the funds to all your creditors. So, you don't need to make multiple payments to individual creditors at different rates of interest.
Reduction/elimination of late fees
: When you default on a debt account, late charges, penalty fees, and accrued interest pile up with time. These can be reduced or even eliminated by negotiation in a debt consolidation program.
Get debt free faster
: If you pay a little more than the minimum on your credit cards, you'll take comparatively less time to pay off the debt. A consolidation program helps you to make payments such that you don't have to carry on with an account too long. Thus, it accelerates the time period you need to get debt free. With this program, you can eliminate debt in just 4-6 years compared to an average time period of 20 years or more.
Get rid of collection calls
: When you sign a power of attorney with the consolidation company, your creditors and collection agencies are prohibited from contacting you. This saves you from being harassed by creditors.
Improve your credit
: Late payments, defaults and charged-off accounts have a negative impact on your credit score. Once you are enrolled in a debt consolidation program and your accounts start getting paid off, your credit score improves. When all the accounts are paid in full, the consolidation company negotiates with your creditors and tries to get your accounts reported in your favor.
Free debt counseling
: Most debt consolidation companies offer free debt counseling service to debtors willing to consolidate their bills and debts. The counseling session allows you to analyze your situation and discuss your options to get financial freedom with a debt consultant. This is to make sure that you know what's best for you.
How the Community helps you
Debt Consolidation Care community ensures that you get in touch with a reliable company to help you get out of debt. Moreover, the community provides a platform - the Debt Forum for you to get advice from members/experts and resolve your debt problems.
By signing up for counseling session, your provided details (Name, Email ID and Phone No.) will be forwarded to the company advertising on the DebtCC. However, you have no obligation to use their services.
Some creditors and collection agencies refuse to lower the pay off amount, interest rate, and fees owed by the consumer.
Creditors/collection agencies can make collection calls and file lawsuits against the consumers represented by the debt relief companies.
Debt relief services may have a negative impact on the consumer's creditworthiness and his overall debt amount may increase due to the accumulation of extra fees.
The amount which the consumer saves with the use of debt relief services can be regarded as taxable income.