How does debt consolidation work?
Question:
Answer:
Most of them will cut your credit cards.
your credit may go downat the beginning, but will improve afterwards.
It combines your credit and loan debts so that you have a lower monthly payment but it affects your score negatively because it shows that you could not pay them independently. Remember school loan consolidation doesn't work the same way and doesn't affect your credit.
If you go with a debt consolidation program you will be set up to make one payment each month thru the company to your creditors, and the benefits you will recieve are lower interest rates, no late fees, overlimit fees, lower payments, etc
Some will work with you and ask how much you can afford to pay and divide that amount and send that pymt to each creditor. The company will then send a "proposal" which is just a letter stating that you have decided to consolidate and will they accept you into the program.
FYI Most companies will not decline the proposal because they will be getting their payments vs no payments
Your credit card accounts are closed not inactive because they don't want you charging up more debt while you're recieving the benefits that you wouldn't otherwise be recieving.
It decreases your credit score temporarily but it will go back up gradually. But even if your score decreases you shouldn't be applying for new credit anyway, and by the time you're done with the program (depends on how far in debt you are) your score will be in good condition afterwards.
Research and get a reputable debt consolidation program
Try www.careonecredit.com
I have them and they have great customer service and other useful tips on their website
hope this would help
have a great day
Opt for a debt consolidation loan: The easiest method of getting a debt consolidation loan is to utilize the equity of your home. Equity of your home is calculated and determined by the difference in the amount you have paid and the amount you owe. If the amount you have paid is more than the amount due, you can use it as collateral. This allows you to borrow money on lower interest rates. Besides, you also get tax benefit on this type of loan. Consult your tax advisor before opting for this loan.
More Related Questions & Answers...