Optimal Credit Consolidation Services for Someone in Need

With high unemployment and an increasing cost of living, many people are looking at credit consolidation services. First you need to understand what these services are and what they can do to assist you.

The Difference between Credit Consolidation and Credit Counseling

Credit consolidation is a way to take many if not all of your debts and pay them off with the proceeds from one loan. Credit Counseling Services act more as an advisor that will help you explore your options to manage your debt payments.

Credit Consolidation Services

Credit consolidation services are companies, organizations or agencies that assist people having trouble making their monthly credit card and loan payments. They work with the person to find a way to consolidate or merge their debts into a single loan. This way you have one payment each month that will usually lower than the total of all your individual debts.  If you still have a good credit rating, you can sometimes get a lower interest rate than you have with your credit card companies. They also have a relationship with lending institutions that offer consolidation loans.

When You Need to Visit a Credit Consolidation Service

There are some signs you should look at to help decide you might need this service:

  • If you’re maxed out on your credit cards and barely able to make just the minimum payments on your credit card bills.
  • If you’re putting off seeing the doctor because you cannot afford it this month.
  • If your using one credit card to make the payment for another credit card or loan.
  • Your savings are gone or used to make your payments.

What to Expect

First the counselor will review your income, your cost of living and expenses to consider the extent of your situation. They will help you look at ways to reduce your expenses to be able to have better handle your financial situation.  They will also determine if a revised monthly budget will better serve you.

If you do not have enough money to make full monthly payments to your creditors, but enough to pay a loan, they will help you investigate taking out a consolidation loan to pay off your credit cards and have one longer term loan. With this option, you will need to cancel all credit cards and live within your budget.

What Happens If You Do Not Qualify

After the counselor reviews your financial situation, if he cannot find a plan to help with consolidation he might advise you about bankruptcy.  A bankruptcy will not clean up a bad credit and because of Federal law - a bankruptcy can remain on your credit report for up to 10 years. After a bankruptcy, the counselor may work with you to help re-establish your credit. The quicker you can re-establish your credit the sooner you will be able to get your financial life back on track.

Do Your Own Research

Not all counseling and consolidation companies are legitimate. Make sure they are affiliated with the National Foundation for Credit Counseling or the Association of Independent Consumer Credit Counseling Agencies. Check with your local Better Business Bureau to check any claims against them. You can also inquire at a local bank for references.

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