The first step to learning what debt consolidation can do to help you out is learning about what it is. The consolidation of debt is exactly what it sounds like. All of your debt that is spread out between different companies is contained by a single company. You now owe them all the money and because of that you have less bills to worry about, and lower payments overall.
The first thing you have to do in order to be considered by any company that consolidates debt is apply to them. The company will have an application form that they want you to fill out. Make sure to answer everything on the form honestly and send it in to them as quickly as possible. There will be money questions to find out how reliable you are and if you are a good fit.
Typically you will get one of two responses from the company. They will either ask you to provide documents to verify everything that you said in your form, or they will give you a flat out no. When they ask for papers verifying everything simply send all of the needed documents to them and wait for them to look everything over. If everything is in order you will be accepted and they can begin the process.
When your approval is pushed through the company gets going with their end of the work. The first thing they do is pay off your accounts. To do this they just get in touch with everyone you owe money to and they do their best to work out a favorable deal.
While closing your accounts out there is a very good chance they aren't going to be paying what you owe the companies. Since they pay it off at once they get a good discount on the balance which in the end helps them make money off your accounts, provided that you pay them back eventually.
Then once the accounts are cleared they draw up a new account for you with their own company. You now owe them for the debt that they cleared up for you. Instead of paying all those smaller bills each month you just have to pay one larger bill. There are benefits to this arrangement on both sides of the deal.
You get the benefit of a lower monthly payment and not having to keep track of so many different bills. And they get the benefit of making a profit. On top of settling accounts of less money they will charge you a higher interest rate, and you will pay for a longer period of time making you pay out even more in interest.
Debt consolidation is a valuable tool to anyone struggling with payments that are just too high, but it is also a dangerous game to play and you should avoid getting a consolidation loan unless you have no other choice.
The first thing you have to do in order to be considered by any company that consolidates debt is apply to them. The company will have an application form that they want you to fill out. Make sure to answer everything on the form honestly and send it in to them as quickly as possible. There will be money questions to find out how reliable you are and if you are a good fit.
Typically you will get one of two responses from the company. They will either ask you to provide documents to verify everything that you said in your form, or they will give you a flat out no. When they ask for papers verifying everything simply send all of the needed documents to them and wait for them to look everything over. If everything is in order you will be accepted and they can begin the process.
When your approval is pushed through the company gets going with their end of the work. The first thing they do is pay off your accounts. To do this they just get in touch with everyone you owe money to and they do their best to work out a favorable deal.
While closing your accounts out there is a very good chance they aren't going to be paying what you owe the companies. Since they pay it off at once they get a good discount on the balance which in the end helps them make money off your accounts, provided that you pay them back eventually.
Then once the accounts are cleared they draw up a new account for you with their own company. You now owe them for the debt that they cleared up for you. Instead of paying all those smaller bills each month you just have to pay one larger bill. There are benefits to this arrangement on both sides of the deal.
You get the benefit of a lower monthly payment and not having to keep track of so many different bills. And they get the benefit of making a profit. On top of settling accounts of less money they will charge you a higher interest rate, and you will pay for a longer period of time making you pay out even more in interest.
Debt consolidation is a valuable tool to anyone struggling with payments that are just too high, but it is also a dangerous game to play and you should avoid getting a consolidation loan unless you have no other choice.
About the Author:
I'm a debt relief professional specializing in personal debt management. To learn more about debt consolidation help, please visit my website.
