Q. What is Debt Consolidation?
A. It is a process through which all your debts are consolidated into a larger one and you pay one monthly payment, which the Debt Consolidation agencies help apportion to all your creditors. They negotiate with your creditors to lower your monthly payments.
Q. Does Debt Consolidation mean more loans?
A. No. Debt consolidation works by reducing and/or eliminating interest, penalties, and late fees, through negotiations with your creditors. Loans create more debt.
Q. How can I benefit From Debt Consolidation?
A. You make one monthly payment, which is lower than all the combined payments you make to all your creditors. Your Debt Consolidation agency uses this payment to pay off the principal - the actual debt – and the interest on the debt. You can get out of debt faster with a Debt Consolidation plan.
Q. How do I know when to contact a Debt Consolidation service?
A. Assess your debt-to-income ratio. Check if it is easily manageable. It is time to contact a Debt Consolidation service when your debt-to-income ratio is very high.
Q. Will it affect my credit rating?
A. It depends. Most Debt Consolidation plans have creditor participation. Your payments, which go towards reducing your debt are recorded as prompt payments, and improve your credit rating.
Q. How long will it take me to get out of debt?
A. The time it will take depends on your individual case. It depends on the kind of debt, and the amount of your debt. On an average, it takes around 2 to 3 years, but in certain cases, as per experts, it could be as long as 4 years. As mentioned, it depends on the type of debt, the amount of debt, and your determination and ability to pay off the debt.
Q. Is there a fee for debt consolidation services?
A. Yes. It is included in your monthly payments and is quite lower than the amount you save in reduced interest and other charges.
