Credit Consolidation Program

Although a credit consolidation program has many benefits for people who are dealing with overwhelming debt, the responsibility for discharging debts to creditors still remains with the debtor. With a consolidaton program, all of the amounts due to the various credit card companies, utilities and other unsecured loans are gathered together into one loan. This certainly makes things easier for the debtor, who now only has to pay one monthly bill instead of several. However, keep in mind that these programs sometimes spread the debt obligation out over a longer period of time in order to make payments more manageable for the debtor, so in the long run, he or she may end up paying more in interest fees. For some people, though, this may be the only way to manage a debt problem which has gotten totally out of hand.

Unlike debt settlement, where an organization will try to negotiate away at least a significant part of the debt for its customers, participation in a credit consolidation program should not have a lasting impact upon a person's credit score. Actually, if someone adheres to the payment schedule provided by these programs, in the long run one's score should improve as debts are retired. Also, using a credit consolidation program can result in a lower interest rate, which can be more beneficial than the variable rates charged by some cards. This can result in considerable savings for the consumer. Accounts can be brought current, and late fees and over limit fees eliminated. Best of all, annoying debt collection calls will finally cease.

Of course, there are costs as well as benefits from enrolling in a credit consolidation program. For one thing, card accounts which are part of the program will probably be frozen for the duration of the program. Although difficult, this restriction is actually a blessing in disguise for the person who is only beginning to develop the discipline needed in order to manage his or her cards effectively. This way, real progress can be made on eliminating debt, instead of merely shifting amounts around from card to card. For true emergencies, one card may be kept out of the program.

There is a certain element of risk in utilizing a credit consolidation program. People who are in debt will not have their homes taken away by credit card companies. However, many times a home equity loan or home equity line of credit is used in the consolidation of debt. If a home is put up as collateral in this way, creditors may begin foreclosure procedings if the person defaults on the loan. For this reason, a consumer should carefully consider all of the ramifications of this decision. Speaking of consequences, consolidation programs will have much less of an impact upon a person's financial score than filing for bankruptcy. Bankruptcy, with all of its negative connotations, can remain listed on an individual's report for up to ten years.

For a reliable, fair deal on a credit consolidation program, check with banks or credit unions where you already have an established relationship to see if they can offer any help. An Internet search will uncover many sources, yet a person has to be careful to check that these are legitimate businesses. Check on unfamiliar organizations with the Better Business Bureau for any problems which have been reported by other consumers. Actually, this is a good practice to perform with any company, even those recommended by friends or relatives. Be sure to read all terms and conditions carefully before signing any contracts.

All the assistance rendered by a credit consolidation program will be rendered useless if old patterns of credit use are repeated. Instead, it may be beneficial to participate in a group which tackles the issues of dealing responsibly with finances and credit. Many churches offer a course which presents Biblical principles for using money properly. This can help provide the element of accountability which may be needed in order to succeed in becoming (and remaining) debt free. Some adult education classes also feature low cost information on financial management. Internet articles are available which deal with all aspects of personal financial management. Of course, all of this information needs to be put into use at some point before benefits can be realized! In this regard, the words of Psalm 25:11-12 are appropriate: A word fitly spoken is like apples of gold in pictures of silver. As an earring of gold, and an ornament of fine gold, so is a wise reprover upon an obedient ear.

After the credit consolidation program has been established and research on financial best practices has been done, it remains for the debtor to put all this new-found information into practice. One important step in maintaining a grasp on finances is to develop a budget so that expenses do not get out of hand again. Although some people resist the idea of having a budget, thinking it will somehow be restrictive, it can actually provide a measure of freedom. Knowing that a certain amount is set aside for a specific purpose can allow a person to enjoy the activity without worrying whether he or she is overspending in this area. Knowing that bills are being paid on time can be a great relief to those who have previously struggled with this area. There is a certain sense of satisfaction in knowing that one's monetary affairs are in order, and that it is possible to live well, yet remain within budgetary limits.

Credit Consolidation Services

Connecting with credit consolidation services can sometimes bring a needed ray of hope into the financial situation of those struggling to pay monthly bills. However, the wise borrower will not be persuaded by rosy promises from various lending organizations or debt consolidators. Careful research before moving forward with any agency is always a good idea. When personal debt issues have gotten out of hand there can be no quick fix. Any genuine remedy will take time, discipline and patience. Choosing a wise and responsible plan of action is far better than waiting until personal finances are in tatters and bankruptcy is the only choice that is left. Consolidating debt can be done in a number of ways. Some debtors pursue a single loan that can be used to pay off other unsecured debts and bring all money owed under one convenient umbrella. This loan could come in the form of a larger unsecured loan, or could be a loan that requires collateral such as home equity financing. There are also credit consolidation services that will negotiate with a borrower's creditors and attempt to bring a client's debt situation under control. Whichever option a debtor might choose, taking steps to deal with troubling credit issues is always a good idea.

Of course, there are many different approaches that may come under the category of credit consolidation services. Not all of these approaches are wise or will be helpful in the long run. There are many mistakes that can be made in the attempt to handle out of control debt. One such move might be agreeing to lending terms that are something less than friendly. Often, the individual who is need of some type of consolidating loan will find attaining funding to be very difficult. This may be because of a spotty credit history or a legacy of missed payments or defaults. Predatory lenders will take advantage of this situation by offering high interest rates, unreasonable fees, and hidden fine print that can drastically change the terms of a loan in the event of a late payment. These lending opportunities can end up providing a very expensive solution to any already complicated problem. Not all credit consolidation services are created equal. Some will lure a borrower with the promise of easy terms and professional negotiation with creditors. What these lenders don't make immediately clear are the extra monthly fees that are charged to the vulnerable borrower. Another ploy that is frequently used by unscrupulous lenders is to extend the life of the loan far beyond any kind of reasonable pay off time. Often, the service that is offered by these organizations is something that individual borrowers can accomplish on their own.

When a consumer is overloaded with charge account debt, it may be tempting to seek out an additional charge account with lower interest rates and transfer previous balances to that account. Unlike the efforts of credit consolidation services, this approach does not entail any negotiations with creditors or redefinition of terms. Known as the balance transfer trap, handling unsecured debt in this way can be an expensive mistake. By luring the borrower in with a promise of low rates, these accounts conceal the fact that the interest rate that is being offered will rise dramatically after a specified period of time. Many debtors will begin a game of charge account roulette. This involves continually transferring balances from card to card in pursuit of the best lending terms. Sooner or later, this little game will start to impact a borrower's credit rating and they will suddenly find themselves being turned down for new charge accounts. Of course, this can result in the borrower finding themselves stuck with a large amount of debt on a charge account with an even higher interest rate. The net result of this approach can end up being a lowered financial score and even higher monthly payments. The Bible talks about the importance of giving thanks to God. "It is good to give thanks unto the Lord, and to sing praises unto thy name, o most high." (Psalm 92:1)

There are many reputable credit consolidation services that can make a big difference for those who struggle with unsecured debt. Legitimate services will work with a client's creditors to develop a plan for repayment that addresses the needs of both the lender and the borrower. The client will then make monthly payments to these credit consolidation services that will in turn disperse the funds to the various creditors according to the negotiated agreement. Another approach that might work well for the borrower could be the use of a home equity loan to pay off unsecured debt. One major benefit of this approach is that the outstanding unsecured debt will be paid off once and for all. A downside to this approach is that a borrower's home is put at risk should the borrower find that they are not able to make payments.

Unfortunately, any consumer who has poor credit or who does not have any significant equity in their home will not be able to use this method as a solution to debt issues. There are also many non profit credit counselors who can help a borrower work out an agreement with creditors for a small nominal fee. However, some so called non profit credit consolidation services are not what they appear to be. There have been reports of many organizations that mask as non profits when they are actually nothing of the sort. Checking out any organization with the Better Business Bureau is always a good idea. Whether working through a professional financial agency or finding a solution on their own, the wise borrower will take timely steps to avoid financial disaster.

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