When to Select Debt Consolidation - Criteria
Debt consolidation is the most benign and responsible way to seek debt relief when suffering a financial crisis. A good credit counselor asks several questions when consulting with you about your financial situation. These considerations are as follows:
- You must be able to afford your new monthly payment through debt consolidation.
- You know that you cannot get out of debt making minimum payments at high interest rates.
- After making those minimum credit card payments, you have very little money left, if any.
- You are not purchasing a major asset within the first year of your program.
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Necessary concessions:
- In the short term, in debt consolidation, your credit will be affected but it should improve steadily after approximately one year of participation. This is far more desirable than the results you obtain from debt settlement or bankruptcy.
- In debt consolidation, it takes between 4 to 6 months for some of your accounts to be re-aged and brought current and for late fees to stop accruing. This is not an unreasonable amount of time to wait when considering the length of time it takes an attorney to handle a bankruptcy or debt settlement negotiation.
- While in debt consolidation, your credit card accounts will be closed. This may not be an undesirable consequence since the temptation to use your credit cards is removed. You will be able to obtain credit when you complete the debt consolidation program if you adhere to the program requirements.
- You must be committed to your debt consolidation. If you skip your program payments, some of your creditors might disallow your participation in debt consolidation for an entire year and even more in many cases. This, however, largely depends on the creditor. Most creditors are not so harsh.
- You will not be able to obtain additional credit during the term of your debt consolidation program. However, a major asset purchase, such as a home, is possible after approximately one year of participation.
- The success of your debt consolidation program almost completely depends on YOU. That's right! Be as proactive about getting out of debt as you were when you incurred it. Don't sit back and expect your creditors to make this easy. You must send your creditor statements to the payments and proposal center on a monthly basis for at least the first six months of your program in order for your accounts to be monitored.
- Creditors do not notify the center as to the progress of your accounts. They notify YOU on your statements. This is true for any company you enroll with. If you're shopping around, make sure that the company you enroll with is in the habit of performing six month audits of your accounts to correct any ongoing problems.
Stay Informed. Remember, the largest debt you owe is to yourself.
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Debt
settlement involves negotiating with creditors to lower the
amount that a consumer owes. When done properly, a debt
settlement company is able to reduce the balance owed by its
clients by up to 50 percent and have them out of debt in as
little as 12 to 36 months.. |
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