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What is
the difference between loan consolidation and simply paying
off all of my debts with a lower interest credit card, or
refinancing a mortgage to pay off debt?
The biggest difference is that you will not be going even
further into debt. A debt management company works with the
creditors you already have and pays off those debts. Another
difference is that if your credit is poor, you might not be
able to get a card with lower interest, and the bank may refuse
to refinance the mortgage. Consolidation helps you to ultimately
achieve total elimination of your debt, rather than just extending
it out. Finally, debt management services companies are generally
able to extract a compromise from your creditors. They will
be able to get lower interest rates and may even be able to
get your creditors to forgive part of the principle. It's
unlikely that you could do that on your own.
How much
can I expect debt consolidation to reduce my payments?
That will depend on the types of loans and on the agreements
that can be forged with your creditors. Often, however, your
payments will be reduced by as much a 50%.
What kinds
of debts can I consolidate?
Nearly any kind of debt, but particularly unsecured debts
like retail store cards, credit cards, gas cards and many
other types of debts can be consolidated. Secured debt such
as a mortgage or car loan may also be eligible for a consolidation
loan.
Will I
still be able to use credit cards?
Yes, but you shouldn't want to. The purpose of debt consolidation
is to get out of debt. Some programs require you to close
all of your credit card accounts except for one which is only
to be used in dire emergencies.
Wouldn't
it be easier to just file for bankruptcy and get out from
under all of the debt?
No. Recent changes in the laws have made filing for bankruptcy
much more difficult. There are court fees and delays. And
even if you are granted bankruptcy, you may still be ordered
to pay off certain debts. Meanwhile your situation continues
to worsen.
How do
I stop the harassing phone calls?
Usually, once you enter a counseling program, your creditors
will quit calling you. After all, they will be getting a monthly
payment from the company. If they do continue calling, you
should report it to the company that is representing you.
How soon
can I expect my credit rating to improve?
Your credit rating should improve once you have made faithful
payments for one year. With bankruptcy, on the other hand,
your credit is destroyed for seven years or more.
How do
I get started?
With a few simple steps, you will be on your way.
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