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Debt Consolidation Program

What You Should Know

Millions of Americans have fallen into significant debt, juggling multiple bills every month.

Many struggle to keep all of their bills straight and often have a difficult time making all of their payments.

For individuals struggling to make payments on multiple debts, debt consolidation might be the best solution to their financial challenge.

Two types of debt consolidation exist: a debt consolidation loan and a debt consolidation program.

A debt consolidation loan essentially is a new loan that replaces your existing debts, allowing you to focus on making only one payment per month. While a debt consolidation loan is beneficial for many individuals who are debt, not everyone can benefit from this option.

Securing a debt consolidation loan often requires good credit, and many times, if you are in over your head in debt, your credit score is probably not very strong.

However, for those who are unable to qualify for a debt consolidation loan or even for those who just want to focus on paying off their current debts versus opening a new loan to cover them, a debt consolidation program might be the best way to go.

How a Debt Consolidation Program Works

A debt consolidation program is a service that works with your creditors for you while you pay down your debts. Program representatives often will negotiate lower interest rates with your creditors, which will bring your monthly minimum payments down and save you money in the long run.

Once new rates have been determined, the program will work with you and develop a debt repayment plan, often with the goal of having your debt paid off within four to six years. You then will make one payment directly to the program, which in turn makes payments to your various creditor.

When working with a debt consolidation program, there are generally a one-time representation fee, which covers the initial contacts with your creditors, and a monthly representation fee.

How a Debt Consolidation Program Can Help

A debt consolidation program can assist those with multiple debts in several ways.

First, a debt consolidation program is able to negotiate with your creditors to secure lower interest rates on your debts.

Additionally, a debt consolidation program can simplify your monthly budgeting by turning multiple payments and due dates into one monthly payment.

This financial service also often offers debt counseling to its clients, providing them with the tools they will need to avoid falling into unmanageable debt again.

Risks to Consider When Considering a Debt Consolidation Program

While a debt consolidation program might appear to be a great solution for those in debt, there are factors that should be considered carefully before moving forward with such a program.

As noted, a debt consolidation program does come with certain fees. A good debt consolidation program should be able to outline the total amount you will end up paying with all fees included in order to ensure that you do not pay significantly more in the long run than if you had stuck with making multiple payments.

In addition, there are a number of debt consolidation businesses out there - some reputable, some not so much. When shopping for a debt consolidation program, you should determine what kind of reputation a certain program has. How long has it been in business? Does it have any complaints with the Better Business Bureau? Does it have any accreditations and if so, what are they?

Finally, when signing up for a debt consolidation program, you should be ready to follow whatever debt management program the service develops for you. It is very important to never miss a payment or to make a payment late. Additionally, while working with a debt consolidation program, you will need to avoid making any major purchases, opening any new credit cards or making balance transfers.

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