Do you feel overwhelmed by the pile of outstanding bills you face every month? Debt consolidation programs could help you pivot toward an empowered future. Take a look at the 10 debt consolidation facts below, which we hope will help you to discern if this path is the best choice for you.
1. Debt consolidation programs vary greatly between different financial institutions and nonprofits. Be wary of salespeople who are hasty and try to rush the process. Do research and ask questions; this ensures that you choose a plan that is best suited for your needs.
2. There is a big difference between debt consolidation loans and debt consolidation programs. A debt consolidation loan is an additional loan that allows you to pay off the entirety of your outstanding debt. Secured consolidation loans use your home or property as collateral. A debt consolidation program restructures your debt, acting as a bill paying service that negotiates interest rates on your behalf.
3. Debt consolidation programs require one consistent check every month, making it easier to pay your bills and less likely that you will incur late fees.
4. Managing your debt through a debt consolidation loan program offers you lower interest rates. Unfortunately, some institutions try to recruit new clients with “teaser” interest rates that increase after a certain period of time. When you ask about interest rates, make sure to confirm that the offered rate is fixed for the duration of the loan.
5. Debt management companies and organizations include fees for their services. Some financial institutions are not upfront about these charges. Make sure to explicitly ask about all accompanying fees.
6. Even if debt consolidation programs include lower interest rates and smaller monthly payments than your regular bills, you could end up paying more in the long run because of the extended life of the program. Calculate the difference in cost between paying your bills and following a debt consolidation program.
7. Nonprofit debt consolidation organizations have longstanding relationships with lenders. They use their resources to lessen or completely eradicate fees you have incurred with lenders.
8. If you have a low credit score because of missed or late payments, a debt consolidation program can help you to rebuild your credit.
9. Federal student loans can be consolidated at low interest rates, even if you have defaulted on the loans. Private student loans should be consolidated separately, with the typical term ranging between 15 and 30 years.
If you are still unclear about debt consolidation facts, learn more about the variety of options at your disposal. There are an abundance of resources available to you, the most valuable being experienced professionals willing to support you on your financial journey. Knowledgeable credit counselors will help you to sift through the facts and identify the most beneficial plan to reduce your debt.
Consumer Education Services, Inc. (CESI) is a non-profit service provider of comprehensive personal financial education and solutions for all life stages and for all of life’s milestones. Our goal is enhanced economic security for everyone we serve.
CESI is NOT A LOAN COMPANY