There is a lot written about debt consolidation and though most of it cant be labeled as false, truth is that it is not always true either. Debt Consolidation Agencies make many claims in order to attract customers, which is legitimate. However, since some of those claims are too close to what can be called false advertising, it is best if customers know some facts beforehand.
Debt Consolidation can really solve debt problems provided that certain variables allow it. Not all debt can be consolidated and some debt, though it can actually be consolidated, is sometimes best to be left alone. Here are some true facts about the debt consolidation process.
Debt Reduction Is Not Always 65% Or More
It is true that some people can achieve a debt reduction of up to 65% or even more. However, those who can achieve such results are in terrible debt problems and have been already charged abusive punitive fees and exorbitant interest rates for their debt. The debt negotiators can reduce interest rates, and eliminate debt generated by missed payments and late payments in the form of fees and extra costs. Thats the reason why someone in such situations can get a debt reduction of up to 65%.
In common situations a debt reduction can range between 15% to 40% and sometimes even less. Moreover, is certain situations, debt may even grow. This is due to the fact that sometimes the solution for debtors is not a debt reduction but a reduction of the amount of the monthly payments and this is done by spreading the debt over longer repayment programs thus generating more (but affordable) debt.
Your Credit Score May Suffer
Your credit score wont be affected if the debt consolidation agency has agreements with creditors and they dont inform that youve entered a debt consolidation program. Otherwise, your credit score will drop considerably. Nevertheless, within a short time and due to the results of debt negotiation your credit score will begin to rise consistently.
If your debt problems are solved by using a debt consolidation loan, your credit score will also drop. However, since your debt exposure will also drop, over the time your credit score will continually increase as long as the loans monthly payments are always on time. That being said, debt consolidation almost always reduces your credit score for a short period of time till debt negotiations end and you start repaying your debt.
There Are Many Scams Out There
You need to be especially careful with unscrupulous companies that claim to be debt consolidation agencies and wont do anything but take your money. If the agency states that they will make payments on your behalf, make sure to claim the receipts for those payments. Remember that missing payments and paying late will affect your credit score. Thus, these scams cannot only cost you money, but they can also destroy your credit score ruining your ability to get finance for many years.
Debt Consolidation can really solve debt problems provided that certain variables allow it. Not all debt can be consolidated and some debt, though it can actually be consolidated, is sometimes best to be left alone. Here are some true facts about the debt consolidation process.
Debt Reduction Is Not Always 65% Or More
It is true that some people can achieve a debt reduction of up to 65% or even more. However, those who can achieve such results are in terrible debt problems and have been already charged abusive punitive fees and exorbitant interest rates for their debt. The debt negotiators can reduce interest rates, and eliminate debt generated by missed payments and late payments in the form of fees and extra costs. Thats the reason why someone in such situations can get a debt reduction of up to 65%.
In common situations a debt reduction can range between 15% to 40% and sometimes even less. Moreover, is certain situations, debt may even grow. This is due to the fact that sometimes the solution for debtors is not a debt reduction but a reduction of the amount of the monthly payments and this is done by spreading the debt over longer repayment programs thus generating more (but affordable) debt.
Your Credit Score May Suffer
Your credit score wont be affected if the debt consolidation agency has agreements with creditors and they dont inform that youve entered a debt consolidation program. Otherwise, your credit score will drop considerably. Nevertheless, within a short time and due to the results of debt negotiation your credit score will begin to rise consistently.
If your debt problems are solved by using a debt consolidation loan, your credit score will also drop. However, since your debt exposure will also drop, over the time your credit score will continually increase as long as the loans monthly payments are always on time. That being said, debt consolidation almost always reduces your credit score for a short period of time till debt negotiations end and you start repaying your debt.
There Are Many Scams Out There
You need to be especially careful with unscrupulous companies that claim to be debt consolidation agencies and wont do anything but take your money. If the agency states that they will make payments on your behalf, make sure to claim the receipts for those payments. Remember that missing payments and paying late will affect your credit score. Thus, these scams cannot only cost you money, but they can also destroy your credit score ruining your ability to get finance for many years.
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