You are not alone if you are struggling to manage your credit card debt. Do not let concern about your responsibility deter you from getting the help that you need. Millions of people around the world run into the same problem. This difficulty is even more common now due to the various economic crises that have plagued the international economy recently. Unemployment, housing troubles and runaway inflation have taken their toll on everyone. Fortunately, there is a way out of debt that avoids bankruptcy, pays off your debts and manages to lower the total payout that you feared you would never be able to make.
What is Debt Consolidation?
Debt consolidation is a great way to eliminate your credit card debt and other unsecured debt in a surprisingly responsible manner. More and more Americans and others are turning toward this solution. By contacting a debt consolidation company, you can get the ball rolling and begin removing all that debt from your credit record and from your conscience almost immediately.
Many people in this situation turn to another lender. This merely perpetuates the already present problem. A new lender just means a new loan and another, possibly larger, obligation that cannot be met. The best form of debt consolidation uses debt settlement as a method of effectively removing debts, lowering your payments and helping you to move on with a clean slate as soon as possible.
Debts That Can Be Consolidated
Before you consider debt consolidation as a solution for yourself, you should know exactly what kind of debt is suitable for this resolution and which is not. Debt consolidation companies are prohibited from dealing with certain types of debts due to laws and regulations surrounding them. During your free analysis, a debt consolidation agent will let you know exactly how he or she can help you. Here are some good examples of debts that you can resolve with the help of debt consolidators.
Virtually all credit cards are good candidates for this sort of program. However, you should be aware that debt consolidation does not have a guaranteed outcome. Some creditors will cooperate willingly with a debt consolidator while others will fight them tooth and nail. Some credit card companies are very resistant to this form of settlement. A consolidation agent will let you know which, if any, of your credit card companies are likely to cause trouble.
• Personal Loans
• Credit Card Debt
• Payday Loans
• Lines of Credit
• Medical Bills
• Business Debts
This class of debt is often referred to as unsecured. You simply owe these creditors money without any complications. Secured debt is off limits for reasons explained below.
Loans That Cannot Be Consolidated
Certain types of loans and debts are out of reach for any debt consolidator. Many are secured debts which involve collateral. Consolidators do not work with these debts because their primary strength in negotiation is refusal to pay. With a secured debt, the creditor can legally begin seizing property belonging to debtors or levy liens against them. Other debts result from court actions which the debt consolidator cannot contravene.
How It Works
Once you are approved for a debt consolidation plan, your debt adviser will instruct you to stop making payments on your debts. This may seem incredible but it is actually critical that you terminate all communication with your creditors. Besides refusing to pay, you will also receive instructions to completely ignore attempted contacts from your creditors and to pass along all information to your debt consolidator.
You will replace your multiple and recurring payments to your creditors with one single monthly payment to the debt consolidation agency. If possible, your debt consolidator will set this payment up so that it amounts to less than the total of the payments that you were previously making. A small portion of this payment will serve as a fee for the debt consolidation company. The rest will begin to amass in a single deposit. Your debt adviser will use these accruing funds as a tool in negotiations with your creditors. Over the course of the next few years, he or she will buy off your creditors. This is usually done by offering them a lump sum which amounts to less than the total that you owe each creditor.
However, this opportunity for one large chunk of cash usually ends up seeming attractive when compared to endless haggling and threats. Once creditors accept payoffs, they wipe the slate clean and erase your debt history. The damage to your credit history, which is significant during the course of these actions, is healed.
Once you are debt-free, you will find yourself bombarded with new credit offers. This may be hard to believe but it is true. You will have to remember, this time around, to refuse more debt.