Frequently Asked Questions about Debt Consolidation
The more informed you are as a borrower, the better the chance that you will succeed with your debt reduction efforts. So many borrowers get locked into the trap of debt because they lack a solid understanding of the fundamentals of debt and effective repayment options. For this reason, we have provided a list of some of the most important and frequently asked questions our visitors pose when they consolidate debt. Before you select a credit debt program, make sure you review these questions and answers carefully so you are well-informed going into the debt consolidation process.
- How do collections agencies work?
- Why should I choose debt consolidation over bankruptcy?
- What are my credit card debt options?
- What is unsecured vs. secured debt?
- How can I deal with creditor harassment?
- What is nonprofit debt help? Is DebtConsolidationTime.com nonprofit?
How do collections agencies work?
When a creditor gives up on collecting a delinquent debt, the creditor sells the debt to a collections agency for a reduced price. For example, a creditor might sell a $5,000 debt to a collections agency for $2,000. The creditor then writes off the difference as a loss on their income taxes. At this point, the collections agency owns the debt and is responsible for getting the borrower to pay.
One of the reasons why debt consolidation works is because collections agencies are usually willing to accept a lower payment amount than the original debt. This is sometimes referred to as a debt relief settlement and is typically negotiated by your debt consolidation program. Collections agencies will accept reduced debt payment amounts because they almost always still make a profit. For instance, continuing with the example above, if the collections agency accepted a payoff amount of $3,000 on the $5,000 debt, they would still make a profit of $1,000.
Why should I choose debt consolidation over bankruptcy?
Bankruptcy will have devastating effects on your credit score. Most bankruptcies will linger on your credit report and drag down your credit rating for seven to ten years. This means you will have to pay outrageous interest rates for up to ten years if you can qualify for credit at all. A damaged credit rating can also lead to high insurance rates and lost job opportunities.
Debt consolidation solutions, on the other hand, allow you to become free of debt without ravaging your credit rating in the process. Debt consolidation programs help you pay down your debts responsibly and affordably without discharging them in a bankruptcy proceeding. Moreover, a credit debt program can actually help you improve your credit rating. Consolidating debt will help you pay on time consistently, and you will see the balances on your accounts dwindle as you make progress. On-time payments and lower balances will both help elevate your credit rating after you consolidate debt, whereas bankruptcy damages your credit score for years to come.
What are my credit card debt options?
Most of our debt consolidation programs specialize in credit card consolidation. Credit card companies tend to be more flexible on rates and payments than other creditors, so it is easier for consolidation services to arrange a workable debt solution with them. If you decide to consolidate credit debt professionally, your consolidation company will work with your creditors to try to improve your rates and payments. Ideally, your payments will become more reasonable, allowing you to become debt free more quickly.
Another option for credit card debt consolidation is to use a loan or a balance transfer to pay off your credit cards. With a balance transfer, you consolidate debt by moving the balances of one or more cards onto a card with better interest rates. The improved interest rates then enable you to pay off the balance more quickly. Secured or unsecured loans can also offer debt consolidation solutions for credit cards by allowing you to pay off your balances with a lower-interest loan from your bank or credit union.
What is unsecured vs. secured debt?
These two types of debt differ in whether they are associated with physical property. Unsecured debt is not tied to a piece of property. Unsecured debts include credit card debts, medical bills, and some types of payday loan debt. Secured debts, on the other hand, are attached to a piece of physical property, such as a house or a vehicle. Secured debts include mortgage loans, car loans, and personal loans that require collateral. Typically, secured debt has more reasonable interest rates than unsecured debt because the lender faces less risk.
Most online debt consolidation services will only accept unsecured debts. Secured debts are much more difficult to consolidate and often don't need to be consolidated in the first place because their interest rates are already low. Lenders of unsecured debt tend to be more compliant with debt consolidation programs because, unlike lenders of secured debt, they don't have the option of seizing property if the borrower fails to pay. As a result, these creditors are more willing to negotiate and cooperate with consumer debt management companies.
How can I deal with creditor harassment?
DebtConsolidationTime.com can refer you to a debt consolidation service that will help you put an end to creditor harassment. The best way to stop creditor harassment is to pay your bills on time, and a debt management plan will help you do just that. Your debt relief service will work on making your monthly payments more affordable so you can pay your creditors on time and pay down your balances rapidly. Once your creditors see that you're holding up your end of the bargain, they will likely stop harassing you for payments.
Another advantage of getting your debt consolidated is that you will not have to deal with your creditors directly after the consolidation takes place. You will send your payments to your creditors through your debt consolidation program, which then distributes the money to your individual lenders. As long as you keep up with your payments, your creditors should have no reason to harass you anymore.
What is nonprofit debt help? Is DebtConsolidationTime.com nonprofit?
Non profit consolidation usually refers to some type of credit counseling agency that assists consumers with budgeting, paying down debt, and dealing with creditors. Strictly speaking, credit counseling agencies do not provide traditional debt consolidation services. They can inform you of your options and offer credit consolidation counseling, but they do not actually consolidate your accounts for you. In other words, there really is no such thing as a non profit debt consolidation company.
DebtConsolidationTime.com is not a non-profit organization, and we do not offer referrals to debt consolidation non profit services. All of our partner debt consolidation programs are for-profit services. Although for-profit consolidation services tend to charge higher prices than non-profit debt reduction programs, they also tend to get better results for their clients. For-profit consolidation companies are more aggressive in dealing with your creditors and securing the most affordable payments possible for you.
If you have any more questions regarding your debt consolidation solution, please contact us. We have representatives ready to assist you 24/7.
