Many consumers have found themselves in trouble over their finances at some point and debt consolidation may offer some relief. When there is a family tragedy, a loss of income, or simply an unintended use of credit trouble can strike. A family can find themselves owing far more than they ever imagined and trying to figure out how to get from under it all.
To ease the stress, all debts are pooled together and one monthly payment is made. This is done with a new loan that encompasses all the creditors. What is included will depend on what the interest rate of the new loan is. It will need to be lower than the current average interest rate of everything put together.
There are companies that offer this service. Someone is assigned to each person wanting help. They will act on behalf of and work with the consumer. A bonus is financial counseling services are typically included free. This helps each person learn how to handle their money so that it never happens again. How well it works is up to the discipline of the consumer.
The counselor will be in contact with all the necessary creditors. Their job is to get them to agree to the lowest interest rate possible. When the rate is low the minimum monthly payment is less, more of the principal is paid and the creditor is paid in full sooner. The money that is freed up with each paid account can go toward paying another one until they are all paid off, each one faster than the other.
The other issues that must be addressed are fees and penalties. These greatly increase the principal. They continue to increase while the minimum is paid so that the principal is never touched, no matter how long payments are made. The counselor will also work with the creditors to eliminate these fees. If they cannot eliminate them then get them reduced significantly.
Each creditor will be contacted and negotiated with. They will be aware someone is working on the consumers behalf. Once the payments start there is no need for them to continue collection activity. This means the letters and phone calls should discontinue. If this is not the case, refer them to the consolidation company.
The goal is to get out from under the mound of debts and remove some of the worry they create. Better credit is another goal and it may take time but can be achieved with a debt consolidation loan. The consumer must look at the fine print and do the math to be sure the new loan is actually saving them time and money.
Discover the basic area of debt consolidation also research the most affordable debt management there is.