Debt consolidation questions
What is debt consolidation?
Debt consolidation is one of the most reputable programs in the industry. It keeps accounts in a current status, and works only to reduce the interest rates and minimum payments owed. Of all debt relief programs, the consolidation option is considered the only solution that is not determined into the consumers credit report when calculating your credit score.
How will debt consolidation affect my credit?
According to FICO's web site, credit counseling is not factored into the consumers credit score. For more information and proof of this, click here to find out what's not in your FICO Score.
Is debt consolidation a loan?
To be rather honest, a consumer couldn't make a bigger mistake. The only way a consumer can get an actual debt consolidation loan, is if they have something to put up for collateral. Remember, the debts consumers have are unsecured. Meaning, should the borrower default on those payments the worst they can do is try to take you to court, garnish or put a mark on your credit. Given you have a debt consolidation loan, the bank will usually request that you put up your home as collateral. So given you don't make the minimum payments through a standard loan offer, they will take your home. When doing this, the consumer turns unsecured debt into secured debt which is a horrid mistake.
What are the benefits to debt consolidation?
The most common benefits to debt consolidation is the reduction of the minimum payments, interest rates and other finance charges.
What are the negatives to debt consolidation?
In exchange for the creditors reducing your minimum payments, interest rates and fee's the creditors will ask that the accounts are put on hold. A small, yet understandable price to pay to see a greater percentage go toward your balance as opposed to finance charges and fee's.
Do my creditors get paid immediately, and do my balances become zero?
No, again this is not a loan. Debt consolidation only works to reduce your minimum payments, interest rates and finance charges. As explained above, a debt consolidation loan is not recommended.
When can I setup my payment date?
The good thing about consolidation, is that the consumer has the ability to setup the payment date for any date they like. So given you want your one payment to occur on the 1st or 15th, this can be accommodated.
Read more: The 5 top questions about debt consolidation
Debt settlement questions
What is debt settlement?
Debt settlement is the procedure to which consumers include all unsecured revolving debts into one lump sum settlement. Consumers often include unsecured debts into this program to settle at around 50% of what is actually owed. Settlement purposely makes accounts fall delinquent, then works to settle at a fraction of what the consumer owed prior to enrollment.
What should I expect during the settlement process?
Do expect to fall behind, when doing debt settlement the accounts fall delinquent on purpose to obtain the best possible settlements. If the accounts go to collections, we do ask that the consumer holds on to any statements or notices they may have received from the creditors. This information is typically requested by the law firm once your file is referred to servicing.
Can I include garnishments, judgments, IRS or other tax debt?
No, consumers can only include debts such as credit cards, collections and medical bills.
What is the average settlement amount?
This can vary, the settlements occur usually between 20% to 70% of the actual balance. The rule of thumb so that your not disappointed, is to expect around 50% of the total balance amount reduced.
How can I get the creditors to stop calling?
This is a common question. Once your file is sent to servicing, it will be asked of you to keep a log of any creditor harassment that comes to light. Also any statements or notices you may have received, will eventually be requested to be sent over. If the creditor harassment becomes really bothersome, there are a few tricks that servicing has that may stop these calls. Most of the time however, they tend to stop once they know of your enrollment.
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