What is Debt Consolidation?

Debt consolidation is the process of taking multiple debts – unsecured debt -- such as a number of credit card debts, medical bills or lines of credit, and combining them into one single monthly payment. There are a number of companies that can do this for individuals in need, such as a credit counseling agency.

The usual benefits of debt consolidation are a lower monthly payment, lower fees, lower finance rates, and sometimes canceled fees or penalties that have accrued over the months because of tardy payments or missed payments. It can take from 36 to 60 months to pay off the unsecured debt but at least the individual is making progress, and creditors take that into consideration – in other words, they won’t be as nasty as they could be when making entries on credit reports.

The process of debt consolidation begins with research. A person in debt should research credit counseling agencies to make certain that they are honest and willing to work for them. The credit counseling agency should be a part of the Better Business Bureau and have referrals. They should be non-profit agencies with credit counselors that have been trained and certified. Once a person has chosen an credit counseling agency they simply make a phone call and discuss their personal finances with a credit counselor. They will have to answer a number of questions dealing with their personal unsecured debt and personal finances. Once that is done, the counselor contacts the creditors and negotiates a monthly price. The person then sends the monthly payment to the credit counseling agency, who in turn pays off the creditors.

The credit counseling agency should also offer educational resources on debt consolidation, paying bills on time, budgeting, money management, and other financial issues that will help the person in debt to learn how to better handle their money. These resources should be free and they may come in booklet form or could be available on the agencies website.

In the end, debt consolidation is a tool to assist a person who can no longer make the minimum payments on their unsecured debt. It is a method to help those from going bankrupt and completely ruining their credit. Before enrolling in a debt consolidation program here are a few questions to consider:

Are your interest rates rising at an alarming rate?
Are bill collectors calling you?
Are minimum monthly payments impossible to make?
Are your debts on your mind day and night?

If the answer is “yes” to any of these questions, a debt consolidation program should, at the very least, be a consideration. Individuals should also act fast, once the debt becomes completely out of control, a debt consolidation program cannot help.

Contact Consolidated Credit Counseling Services at 1-800-320-9929 to find out if a debt consolidation program would work for you. A certified credit counselor will ask you questions about your unsecured debt and personal finances and advise you what the next step is. You don’t have to do debt consolidation on your own. Consolidated Credit Counseling Services is here to help.