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Frequently asked questions about debt consolidation
- Will credit counseling (debt consolidation) damage my credit?
According to the FICO Corporation, credit counseling is not factored into the consumers credit score in any way. We've attached a link which may be found under the FICO Corporation link. Once you've clicked on this link, scroll down to the bottom to find "whether or not you are participating in credit counseling of any kind".
- How exactly does debt consolidation work (steps, procedures, what to expect)?
When going through a credit counseling program, the consumer would first need to go through a consultation or quote with an advisor. After this has been done, the consumer will have the decision to move forward with the proposed solution, or merely decline the offer given by the representative. If a consumer decides to move forward, the representative will ask the consumer what date he or she would like to setup the initial draft date. About one week from when your file gets to the servicing agent, is when the non-profit debt management companies (not Consolidate Debt) will send the proposals to your creditors. Now given a consumer recently started to fall behind, that consumer may be called until the proposals are received and accepted by the original creditor. After these proposals have been received, each month the consumer will make a minimum payment into a trust account. Upon settlement of those funds, they will be disbursed according to what your original creditor wanted. In summation, the consumer is using a non-profit to redirect the payments but on new terms, with the original creditors.
- What will the creditors think about me doing debt consolidation?
The creditors will not mind. In fact, remember it's the creditors who created this program. These debt relief programs were not created by corporations intending to profit off the downfall of consumers but instead, the solutions provided have been offered by the creditors. With this being said and with the statement above on the FICO corporation, the creditors will not mind much if you remained current through a debt consolidation programs.
- Is this something that I can do myself?
There's no doubt that the creditors have internal hardships for debt consolidation. In fact, most statements have an area that asks a question such as; "are you finding it difficult to make the minimum payments". With this being said, a consumer can go through an internal hardship program. But it's always best to go through a non-profit when trying to find the debt relief your looking for. If a consumer has twenty creditors, they would need to go on twenty different internal hardship programs which the consumer may find rather difficult. Given a consumer goes through a typical non-profit, he or she can include all unsecured revolving credit card debt.
- How exactly will debt consolidation provide benefits?
One of the largest benefits to the debt consolidation program is the reduction of the minimum payments, interest rates and of course the finance charges. Another extremely hot benefit, is the reduction of payoff rate. When a consumer is making a high minimum payment for thirty years or more, yet finds that a debt consolidation program reduces the minimum payments while reducing the payoff length down to a fraction of what it initially was. The benefits provided through a debt consolidation program, are extremely beneficial to the consumers considering it.
Frequently asked questions about debt settlement
- Will debt settlement damage my credit?
In a short answer, yes and no. If a consumer includes active credit card debt, then the consumer will fall behind and in turn the credit will be hurt. The accounts will fall behind as the funds are accumulated. But given a consumer is years behind and includes debts such as collection accounts or old medical bills, then debt settlement may actually increase ones credit. It does depend on the consumers debt situation and whether or not the amounts owed are up to date or not.
- How exactly does debt settlement work (steps, procedures, what to expect)?
Debt settlement works by first being quoted by a professional advice. After the consultation process, if a consumer decides to move forward they will be asked a series of necessary questions in order to complete the enrollment. When going through debt settlement, consumers will stop paying the minimum payments (if any, or if current) while the funds accumulate in a trust account. After a few months of fund accumulation, it's at that time when the settlements are made to the creditor. So given a consumer is active with credit card debt and wants to remain active, seek consolidation. However, if the consumer is ok with falling behind, debt settlement is always best.
- What will the creditors think about me doing debt settlement?
Creditors want money, period. The creditors know that their taking advantage of the consumers through high compound interest. When consumers make high minimum payments only to see ten or twenty percent go toward the actual balances, it's only a matter of time until the consumer gives up and either stops paying, or files bankruptcy. With this being said, settlement allows the creditors to be paid a partial amount while keeping the consumers credit in somewhat of a good standing. It's not recommended to do this on your own though, as the creditors may request an insanely high settlement.
- Is debt settlement something I can do myself?
When looking for debt settlement advice, creditors tend to prefer that the consumers go through an attorney driven program instead of doing it on your own. The reason is, it's extremely hard for consumers to save money over a period of months or years. However, when a client goes through a law firm the funds will accumulate into a trust account. Another reason why consumers should not do it on their own, is primarily due to the fact that they do not have relationships with the creditors. Consumers also do not know what the creditors want, or how to properly settle the debts in most cases. When considering debt settlement, it's always advised to seek professional advice.
- How exactly will debt settlement provide benefits?
Debt settlement works by reducing the balance up to a fraction of the amount owed. Although the average settlement is fifty percent, this can range up or down fifteen points. ANother interesting fact to debt settlement, is that creditors tend to want 3% of the minimum payment each month. In settlement, the average minimum tends to be at around 1.7%. So with this said, consumers may be able to reduce the minimum payment up to a fraction of what they owe/
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