Debt Consolidation Service

A debt consolidation service is a method of restructuring obligations that allows the debtor to lower monthly payments, reduce or eliminate late and other fees, and maintain a positive credit rating, all while lowering the overall owed balance. Debt consolidation services use the power of a third party to negotiate on the individuals behalf for new credit terms, often resulting in payments that are smaller with lower or nonexistent interest rates. To qualify for this program, the consumer will need to be committed to getting their finances under control. It is not necessary to own a home, or to have a history of late or missed payments to qualify.

Taking part in this type of service results in lower interest rates and fees associated with the total balance owed, as opposed to a reduction settlement, which is designed to reduce the total balance overall. A debt consolidation service is not a loan; it is an agreement that creates payment planning for unsecured debt. Unsecured debt that is covered by debt consolidation services includes credit, gas cards, retail store cards, personal loans, utility bills, taxes, medical and hospital bills. These programs will not cover student loans or secured loans such as mortgage, auto or equity lines of credit.

A positive aspect of this financial service is the potential for avoiding any negative impact on the consumers credit rating. In fact, debt consolidation services can sometimes improve credit ratings, as the individual consistently makes prompt monthly payments. Agencies do not notify or report information to credit companies, although individual creditors are able to report the individuals activities to a credit bureau. The value of partnering with a debt consolidation service is that creditors are willing to work with them to combine all unsecured obligations into a total amount and accept lower payments over time, rather than forcing the individual to incur greater obligations to shift funds from one creditor to another.

Most organizations, that offer these financial services, will include the use of a credit counselor to work with the individual to identify and restructure the obligations that are currently owed and help the consumer create a plan for managing this amount. Once the plan is agreed to, a debt consolidation service begins contacting and negotiating with creditors to lower payments and the interest rates the consumer is paying. Debt consolidation services provide proposals to creditors regarding the balance due, the approach for paying off the balance, the amount and the date of the monthly payments that will be sent. As the individual makes monthly payments, the organization makes the agreed upon payments to the consumers creditors, which should put a stop to harassing phone calls from creditors. And as balances are paid off, the extra money is moved to the remaining balances, allowing the consumer to pay those off even faster. "The thoughts of the diligent tend only to plenteousness; but of every one that is hasty only to want" (Proverbs 21:5). Working quickly and diligently will make it much easier to reduce and eliminate various financial obligations.

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