Personal and national shifts in economic conditions can put even the most cautious budgeter into the throes of anxiety. Perhaps someone in the family has lost their job or had their hours or pay reduced and what was once a perfectly balanced and achievable budget is now on the ropes. The first step to getting your head above water is to take a hard look at your financial inventory. If your monthly expenses continually exceed your income, it is time to make some hard choices. Some options are bankruptcy, repossession, or a debt consolidation program. Of the three, a debt consolidation program is a good place to start.
What Exactly Is A Debt Consolidation Program?
A debt consolidation program brings all of your unsecured debt under one umbrella. Once in the program, your creditors are contacted, interest rates, penalties, and late payments are re-negotiated. The result is one payment to the company handling your debt consolidation program, who in turn pays your creditors. A debt consolidation program is not loan although debt consolidation loans are often available as part of a program.
Advantages of Debt Consolidation Programs
A good debt consolidation program will help you in a number of ways. It will eliminate the day-to-day stress of collection calls and the need to juggle payments. In addition, it will allow you to pay off your debts in 4-6 years, lower your monthly payment, and reduce or eliminate late fees and extra charges.
Common Debt Consolidation Pitfalls
Debt consolidation programs can give a needed relief to an on-going financial pinch. However, there are a few things to remember.
First, avoid the temptation to use credit cards until you have finished the program. Once in the program, you may have credit available. However, using it can quickly dig the debt hole to a depth you can’t get out of.
Second, debt consolidation programs usually reduce you collective interest rate on unsecured debts. However, it is possible that you will pay more interest than if you had not used a debt consolidation program. The reason for this is that the debt is spread over a longer period of time to make the monthly payment manageable for your household.
Third, if you use your home as security for a debt consolidation loan, failure to meet your payment schedule could result in the loss of your home.
Where to find a Debt Consolidation Program
There are a number of ways to locate a good debt consolidation program. Start with your friends and family. Ask for a recommendation. Contact your bank or credit union. They often have relationships with reputable debt consolidation programs in your area. The internet is another source of debt consolidation programs. Often, however, you are overwhelmed with options. One site that lets you look at debt consolidation programs by state and city is debt consolidation website. Choose one or two that you feel might meet your needs. Then contact each one and gather information.
What to Look for in a Debt Consolidation Program
There are a lot of debt consolidation programs to choose from so it pays to take some time and be sure you are with a reputable organization that will be with you for the long term and can get the job done.
Are they accredited? Debt consolidation programs that employ nationally certified credit counselors help ensure that your information is confidential and that you will get the highest quality of professional services. Two organizations that can help you find an accredited debt consolidation program are the National Foundation of Credit Counseling and the Association of Independent Consumer Credit Counseling Agency.
Are they listed with BBB? The Better Business Bureau can tell you how long they have been in business, what consumers have reported to them, and what their overall standing is in the community.
What Will I Pay for a Debt Consolidation Program?
Normally there are two separate fees associated with enrolling in a debt consolidation program:
- A one-time set-up fee that covers the initial communication and negotiations with your creditors, and
- An on-going monthly fee that pays for the debt consolidation program’s expenses for collecting the payment from you and distributing it your creditors.
When researching debt consolidation programs be sure to inquire about the program’s fees. There are a number of non-profit debt consolidation programs. While their services are not free, their fees may be substantially lower than for profit programs. It always pays to do your homework.
Debt consolidation programs are not a magic bullet. They don’t solve every family’s financial problems. That said, looking into debt consolidation programs and talking with qualified consumer credit counselors is a good place to start. Finally, it is important to understand that a debt consolidation program may solve the problem you already have, but it doesn’t address how you got there. Many of these debt programs also offer consumer education programs that will help you build a solid financial future.
