If you're finding it hard to manage your bills, a debt consolidation program (or bill consolidation) can work in your favor. The purpose of this program is to help you meet your monthly payments and get you out of debt. If you wish to know what a debt consolidation program is all about, have a look at the topics given below:
How do debt consolidation programs work?
Consolidation programs help you reduce your monthly payments and have any late fees/extra charges waived off or eliminated. Given below are the 6 steps in a consolidation program.
Step 1: Go for no-obligation free debt counseling
Contact a debt relief company and attend a free counseling session with their consultant. The consultant analyzes your financial situation and completes an income vs. expenditure review in order to find out how much you can pay towards your monthly bills.
Ask consolidation related questions to the counselor. Make sure you ask the following questions before enrolling into the program.
- Is debt consolidation good for you?
- Will the program help you solve your financial problems?
- How much will you have to pay for a fee?
- What is the tenure of the program?
Step 2: Enroll yourself in a debt consolidation program
If the consultant finds that a consolidation program is the best solution for you, he will send you the documents you need to sign. The consultant will also provide you with details on the fees required and a power of attorney form which will allow him to talk to your creditors on your behalf.
Step 3: Consultant starts handling creditor calls
When you receive the documents, the consultant contacts you in order to answer any questions before you sign the docs. Once you sign and return the documents to the consultant, you can start referring your creditors to the debt consolidation company.
Step 4: Consultant negotiates on your behalf
The consultant contacts your creditors/collection agency and proposes a payment plan you can afford. He also negotiates with them to reduce your interest rates and monthly payments. The consultant then requests your creditors to freeze or reduce extra charges and late fees on your accounts so that you don't have to pay more.
Step 5: You send in monthly payment to the company
Your monthly payment should be sent to the consolidation company which then distributes it amongst your creditors/collection agency. So, multiple bills are actually consolidated into a single monthly payment. Thus, you don't have to worry about handling several creditors at a time.
Step 6: Your creditors receive the payment
Within a few days of receiving your payment, the company forwards it to your creditors. You are likely to receive creditor statements as a confirmation of receipt of your payment.
Generally, the consultant takes an update of your financial situation after every 6 months or so. If in case your situation changes, you should inform the consultant about it immediately. The consultant will re-evaluate your situation and then request your creditors for a different payment plan if required. He will also help you with budgeting and money management tips so that you can organize your finances effectively.
For further information on "how do debt consolidation programs work", browse through the "Debt Consolidation" section in debt management FAQ page.
How does debt consolidation program help you?
The program offers the following benefits:
- Low monthly payment due to reduction in rates.
- You may not have to pay late fees/extra charges.
- You can avoid harassing collection calls.
- Different bills are consolidated into one easy payment.
- Get rid of bills in 4-6 years as compared to an average of 20-40 years.
- Positive impact on your credit.
How do you choose the best debt consolidation program?
In order to choose the best debt consolidation programs, you need to prepare a list of consolidation companies in your area. Then collect the following information about them:
- How long has the company been in business?
- Does the company have good reputation?
- Is it listed with the BBB?
- What are its accreditations?
After you've gathered the details, follow the steps given below:
- Research online and read reviews about the companies.
- Ask for client testimonials.
- Check the company records available on the BBB website.
- Ask for referrals from your friends and relatives.
- Go for a free consultation and look at the details about their programs, fees etc.
- See if they are interested in working with you on their fees and payment schedules.
Compare companies and programs on the basis of the details you've collected. Only then it is possible to find out a reliable company which can offer free debt consolidation programs or quick debt consolidation help to repay your bills.
What are some smart debt consolidation tips?
It is always better to follow some tips when you're trying to clear debts through a consolidation program. These tips will help to pave the way to debt free life:
- Check out the background of the company offering free debt consolidation services.
- Read the reviews of the online debt consolidation companies
- Embrace a frugal lifestyle and try to save money
- Resist the temptation to take out a payday loan
- Save a certain amount to make monthly payments to the consolidation company
What should you avoid in a consolidation program?
Check out the don'ts and avoid them when you're working with a company which provides you with fast debt consolidation help.
- Don't miss a payment or make a late payment.
- Avoid making major purchases while you're in the program.
- Don't take out new loans/credit if you've enrolled in the program.
- Avoid charging up credit cards close to or above the credit limit.
- Don't make any balance transfer while you're in the program.
It gets easier to pay if you consolidate multiple bills into a single payment. This is what best debt consolidation programs do for you. So, if you're looking to reduce your monthly bills and combine them into one easy payment, enroll yourself in a consolidation program and get out of debt faster.
Can you consolidate debt only through a program?
Debt consolidation program is not the only way to consolidate debt. There are other ways through which you can get debt consolidation help.
Check out the 2 ways through which you can get help in consolidating your debt.
- Credit card balance transfer: If you're drowned in a sea of debt, then transferring the balances from the high interest cards to a single low interest card is a good idea. It will help to save your hard earned dollars.
This method of consolidation of debt is helpful only when you repay the credit card balance within the promotional period. Otherwise, you can very well get into the debt trap.
- Debt consolidation loan: A debt consolidation loan helps you put your multiple bills into one affordable monthly payment. Here, you take out a large loan and pay off your unsecured debts. Once you get rid of the unsecured debts, you can start making payments on the new loan. The whole process is also known as loan consolidation.
The lenders will check your credit report and score before approving your loan application. The interest rates will be high if your score is not excellent. In case, your score has suffered due to some financial mistakes, then you can try for bad credit debt consolidation loan.
It is true that there are various ways to consolidate debts. However, before taking advantage of the debt consolidation services or loans, you should analyze the benefits in details. Moreover, get advice on debt consolidation from the counselors and financial experts. These things will help you know if debt consolidation is good for you.