10 Debt Consolidation Facts You Should Know
By Darnell Scott
The first thing to understand is that credit counseling and debt is not the same thing. Credit counseling involves a debt counselor working with you to assist you in making a budget so that you can pay off your debt, whereas debt involves the payment of a bulk amount of money each month allowing the company to issue payments to your creditors. You have to be careful that the company you choose is not attempting to negotiate a settlement by holding onto your payments for an unreasonable amount of time in order to coerce your creditor into settling for pennies on the dollar. Though debt may assist you in getting your finances under control, a settlement will hurt your credit, so you need to avoid that at all costs.
Do not let a debt company convince you that they can negotiate a lower payment plan than other companies because this just isn’t possible. The creditors have set programs for those who enter into debt programs, and only under extenuating circumstances are those programs open to negotiation. Don’t be fooled by the claims that you will save over half on your payments because except for payments that might be past due and showing as a minimum payment due, that just isn’t going to happen.
Another thing to be wary of is that companies cannot negotiate interest rates that are lower than that of the rate that is charged to the customers with the highest credit rating. If you know that your friend has excellent credit and is paying 9.5% interest on his new car loan, be wary if you are quoted a rate more than 2% under that and you have questionable credit. It doesn’t make good business sense for a company to give a lower interest rate to someone who has only fair or poor credit than what is given to someone with excellent or good credit. It’s a ploy to get you in, and once there, your final contract is going to demand a much higher rate than you were quoted. By then, it’s too late for you to back out unless you are conscientious enough to read everything you sign, something many people don’t do.
Debt companies can be quite helpful to people who have tried and failed to get out of debt either because they don’t know how or they
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Darnell is a writer for an online debt blog that offers tips how to consolidate debt and stay out of debt. For more information on how to legally eliminate debt visit our online debt consolidation blog
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