Questions on debt consolidation?
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I called a debt consolidation company once (actually two), and they could not lower any of my bills. It sucked.
Debt consolidation is combining all of your debts into one debt--like you get a home equity loan and use it to pay off your car and credit card bills so you only have to make one payment and it is usually less than the amount that you were paying to each biller before. So, you have more disposable income and a lot of times the interest on the loan you get to consolidate your bills is lower than say credit card interest. A pitfall would be to consolidate your bills and then start charging up a whole bunch of other bills.
I believe you need to change the bad habits that got you into the mess you are in now before even thinking about debt consolidation. If you don't change your habits you will end up even further into debt. Personal finance is 20% math and 80% behavior. If I were you I would read and follow Dave Ramsey's books, Financial Peace, and The Total Money make Over.
If your financial problems stem from too much debt or your inability to repay your debts, a credit counseling agency may recommend that you enroll in a debt management plan (DMP). A DMP alone is not credit counseling, and DMPs are not for everyone. You should sign up for one of these plans only after a certified credit counselor has spent time thoroughly reviewing your financial situation, and has offered you customized advice on managing your money. Even if a DMP is appropriate for you, a reputable credit counseling organization still can help you create a budget and teach you money management skills.
In a DMP, you deposit money each month with the credit counseling organization, which uses your deposits to pay your unsecured debts, like your credit card bills, student loans, and medical bills, according to a payment schedule the counselor develops with you and your creditors. Your creditors may agree to lower your interest rates or waive certain fees, but check with all your creditors to be sure they offer the concessions that a credit counseling organization describes to you. A successful DMP requires you to make regular, timely payments, and could take 48 months or more to complete. Ask the credit counselor to estimate how long it will take for you to complete the plan.
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