Home > Debt > Debt consolidation can eliminate your financial woes: Steps to follow

Debt consolidation can eliminate your financial woes: Steps to follow

Editor: Dan Marshall is guest contributor  Dan’s posts focus on debt related matters such as consolidation and elimination. If you are interested in submitting a guest post at the Wise Dollar, please contact me with an overview of what you would like to post. Thanks – Jose

Credit has become the necessary evil for all the people. As a result, almost 58% of all the credit card users today carry some amount of outstanding balances or the other. It is a serious drawback that is plaguing the country. For that reason, there are many financial services like debt consolidation programs that can resolve the financial problems of an individual. However, to consolidate date there are certain rules that must be followed.

How debt consolidation programs work?

Here are the steps that are followed in a debt consolidation program:

  • Pre-enrollment counseling – In case of people with loads of outstanding credit card bills, debt consultants conduct a pre-screening class better known as credit counseling. This is done in order to gauge the financial capacity of the customers to meet their basic living expenses and whether or not there are any better alternative debt relief options available for them. After assessing the financial resources available at the disposal of the debtors, debt consultants formally induct these people in to their consolidation program. In other words, consumers need to have a considerable amount of cash left after calculating their monthly expenses so as to qualify for such a relief program.
  • Third-party negotiation – Debt consolidation is conducted by the financial experts known in industry terms as debt consultants. People weary of managing multiple payments will not have to do the same calculation once they enroll for a debt consolidation program. These debt consultants do not work as a loan originator instead they flex their industrial influence over the creditors so as to get them waive a part of the additional charges, besides lowering the rate of interests on the loans. This is done as per terms agreed amongst the creditors beforehand. As a result, the monthly repayment amount becomes to affordable to bear that helps these people to become current on their payments.
  • Efficient debt relief plan – The monthly repayment amount under debt consolidation programs remains constant till all the balances are paid off. This is why it is a lot more efficient way to manage and repay one’s overwhelming credit balances. So, people are relieved from deciding how much to pay to all the creditors every month. In addition to that, once a delinquent account is paid off and closed successfully, then that payment amount is added to the other monthly payments. This helps into pay off the debts faster and so, the loans costs less over their repayment terms.
  • Personal credit management – Though it rescues a good number of consumers from their financial troubles, it asks for strict personal credit management in order to reap maximum benefits from the consolidation programs. Consumers will have to sign a written agreement where they have to follow a clause which bars them from taking out fresh loans until and unless the relief program is over.

Finally, consumers need to understand that only a legitimate and authorized debt consolidation companies are make their life debt free. So, they have to find out companies with appropriate affiliations like the Association of Independent Credit Counseling Agencies (AICCCA) or National Foundation for Credit Counseling (NFCC) before enrolling into any debt consolidation program.

Editors Comments: Getting out of debt is a challenge and can be a frustrating and difficult experience. Debt consolidation is one method that will help. Equifax offers a service,Equifax Debt Wise That will help a consumer track and pay down their debt. Once you are out of debt, using a prepaid credit card, such as AMEX Pre Paid will help you control your spending and keep from going into the debt spiral once again. If you have the ability to control your spending and not build up debt you can also explore a cash back card. A cash back card will put some more money into your budget, so long as you use it wisely and don’t build up a balance. Discover is a highly rated cash back card that is worth taking a look at. 

 

 

If you enjoyed this post, please considersubscribing to the RSS feed to have future articles delivered to your feed reader.
The following two tabs change content below.
John Schmoll is a Dad, husband and veteran of the financial services industry. He's passionate about helping people learn from his mistakes so that they can live lives free from the shackles of debt and empowered to make their money work for them. You can check out his other sites: Frugal Rules, for ways to improve your financial literacy; and Sprout Wealth for tips on different ways to make more money. John has been featured on Forbes, Lifehacker, Yahoo Finance and US News & World Report and more. If you're wanting to grow your blog, check out my blog coaching services to see how I can help you take your site to the next level.

Latest posts by John Schmoll (see all)

One comment

  1. Thanks Dan for your submission. Debt consolidation is certainly an option that should be explored in anyone’s quest to eliminate their debt. I have to add that in my opinion it should be one of the last steps (the very last step would be personal bankruptcy) that should be taken after all other avenues have been tried. One word of caution, there are many debt consolidation and relief companies out there that are essentially scams. Before making a commitment with any debt consolidation or relief company verify them with the BBB,Here is a good article that can help guide you in the selection of a debt settlement company, http://www.debt.org/settlement/. The Federal Trade Commision has a website that can also help guide you in selecting a reputable debt settlement company, http://www.consumer.ftc.gov/articles/0150-coping-debt.

Leave a Reply

Your email address will not be published. Required fields are marked *

*

CommentLuv badge