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Understanding the Process of Debt Consolidation
>> Tuesday, September 24, 2013
For you to get why debt consolidation is helpful, you first need to know what debt consolidation is. When you have your debt consolidated you are having it put into one spot. Instead of many bills you will have one, and instead of many outstanding accounts you just have to worry about a single account. This lowers your payments as well as management time.
After you decide that you want to consolidate that debt you have to get in touch with the company you want to use. They will have a form for you to fill out and you simply fill it in and send it to them. The form will ask questions about your finances, your work history, and your current job. They are just trying to decide if you are reliable enough to trust to make the payments. After you send it in you just have to wait for a response.
After the form has been sent in you will have to wait a few days to find out whether or not they are going to help you. They will have to verify all of the information that you provided and they will probably ask you for some documents proving what you said was true. If you get asked for the documents chances are they are going to approve you, simply send the verifying documents and wait for the message that you have been approved.
After approval it is time for the consolidation agency to get to work. The first thing that they will do is pay off all of your debt. They go about this by calling up every one of the companies that you owe money to and work out a deal.
While closing your accounts out there is a very good chance they aren't going to be paying what you owe the companies. Since they pay it off at once they get a good discount on the balance which in the end helps them make money off your accounts, provided that you pay them back eventually.
After the accounts are all settled they create a new debt account for you with their business. From then on they are in charge of your debt and you are responsible to make a single payment to them every month until the debt is taken care of completely.
You will get to pay less toward your debt each and every month meaning that you will have more money left over. You also get the benefit of having a single account to track which makes it much easier to remember to make the payment each month. They get to profit from you handsomely. They will up your interest rate to a higher level than your other companies were probably charging. On top of that they make even more off interest by extending the loan duration.
Debt consolidation is a valuable tool to anyone struggling with payments that are just too high, but it is also a dangerous game to play and you should avoid getting a consolidation loan unless you have no other choice.
After you decide that you want to consolidate that debt you have to get in touch with the company you want to use. They will have a form for you to fill out and you simply fill it in and send it to them. The form will ask questions about your finances, your work history, and your current job. They are just trying to decide if you are reliable enough to trust to make the payments. After you send it in you just have to wait for a response.
After the form has been sent in you will have to wait a few days to find out whether or not they are going to help you. They will have to verify all of the information that you provided and they will probably ask you for some documents proving what you said was true. If you get asked for the documents chances are they are going to approve you, simply send the verifying documents and wait for the message that you have been approved.
After approval it is time for the consolidation agency to get to work. The first thing that they will do is pay off all of your debt. They go about this by calling up every one of the companies that you owe money to and work out a deal.
While closing your accounts out there is a very good chance they aren't going to be paying what you owe the companies. Since they pay it off at once they get a good discount on the balance which in the end helps them make money off your accounts, provided that you pay them back eventually.
After the accounts are all settled they create a new debt account for you with their business. From then on they are in charge of your debt and you are responsible to make a single payment to them every month until the debt is taken care of completely.
You will get to pay less toward your debt each and every month meaning that you will have more money left over. You also get the benefit of having a single account to track which makes it much easier to remember to make the payment each month. They get to profit from you handsomely. They will up your interest rate to a higher level than your other companies were probably charging. On top of that they make even more off interest by extending the loan duration.
Debt consolidation is a valuable tool to anyone struggling with payments that are just too high, but it is also a dangerous game to play and you should avoid getting a consolidation loan unless you have no other choice.
About the Author:
I'm a finance practitioner specializing in UK debt management. To learn more about individual voluntary arrangement advice, please visit my website.
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