Have you looked at your credit card statements recently? Not glanced at them…I mean really looked. If you have, hopefully you have noticed the information that creditors started including in 2010 (Thanks to the Credit CARD Act legislation) that breaks down how long it will take you to pay off the balance making minimum-only payments. It’s shocking when you see it in black and white! It can take decades to pay off a high balance when you only make the minimum payments. When you think about it that way, credit consolidation services that allow you to pay off your balances sooner start to sound very appealing!
What are Credit Consolidation Services?
There are two approaches to credit consolidation services that are commonly used:
- One approach is to take out a debt consolidation loan from a lender. With this loan, you pay off the various creditors and then make one monthly payment to the loan provider. The loan terms typically have the debt paid off in less than 60 months. One of the downsides to this type of loan is that they are not easy to obtain (especially in the current economy) without collateral to secure them. Securing a debt payment with collateral such as a home is ill-advised since you would be putting your home at risk if life circumstances require you to default on the loan payments.
- Another approach to credit consolidation is taking advantage of programs offered through a credit counseling agency. Most credit counseling agencies offer a Debt Management Plan that will allow the consumer struggling with debt to enroll their creditor accounts into this plan. The consumer makes one monthly payment through the credit counseling agency, and the agency in turn disperses those payments to the creditors after negotiating for benefits that can include things like lower monthly payments, lower interest rates and waived fees. This allows the consumer to still pay off their debts in a timely manner (typically in less than 60 months) and make only one payment each month. The downside, for some, is that enrolled creditor accounts are typically closed and no longer accessible. On the other hand, I happen to think that if you are trying to get out of debt, not being able to access your credit card accounts is a plus instead of a minus!
With both options, there are pros and cons – and there is no one-size-fits-all approach that will work for everyone. It’s important to know your options and pick the right solution for you.
If you decide to use the services of a credit counseling agency, be sure to know what you are getting ahead of time. Find the Best Credit Counseling Programs by doing some research and learning more about How Credit Counseling Works.
If you are caught in a cycle of making only the minimum payments on your creditor accounts and you know it’s going to take you many years to pay them off if you keep doing what you are doing now, it’s clear that you could benefit from credit consolidation services. Being debt free will take commitment and effort on your part, but the reward, in the end will be so worth it. An option like credit consolidation can help prevent you from needing to take a more drastic step such as debt settlement or bankruptcy.
If you are ready to take the next step, call for a free consultation with one of our credit counselors. They will help you figure out your options and get you started on the path to a debt-free future!
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