What Is Debt Consolidation and When Is It My Best Option?
What Is Debt Consolidation?
One of the best ways to regain control of your finances is to try debt consolidation. Debt consolidation is for those who are making unsecured payments to multiple creditors each month (for example: credit card bills, personal loans, and medical bills). Even when you’re making the minimum monthly payments on those accounts each month, the interest rates on these debts may be still higher than what you’re paying.
The debt consolidation process combines all your unsecured debts into one convenient payment – often at a lower average interest rate than what you are currently paying. When you work with a debt consolidation company, instead of sending out payments to each of your creditors every month, you send out one payment to your consolidation company that they then disperse among your creditors.
It is a smart way to go because you only need to worry about making one payment each month, and the interest is lower, meaning the debt amount doesn’t accumulate as fast. That way, more of your payment can go toward the debt principal, rather than the interest amount. While there are do-it-yourself debt consolidation programs, many good companies offer consolidation services. Most consolidation companies even negotiate a lower interest rate on the debt, thus helping lower the total debt amount.
How Long Does It Take to Get out of Debt?
On average, customers can be debt free in 36 – 60 months when they work with a debt consolidation company. Typically, customers fall in that middle of that range, at 48 months, or 4 years.
The time it takes to consolidate varies with each program. Many companies offer a consolidation calculator online that one can explore to get an estimated time, monthly payment, etc.
How Are Credit Scores Affected?
Generally, paying down debt positively impacts credit scores. When people consolidate their debt, they have the opportunity to pay it off quicker, and get ahead of the game. Paying on time, and avoiding missed payments will increase your credit score, and keep you out of bankruptcy.
Consolidation Program Recommendations
Consolidated Credit is a transparent and large company that works with certified counselors. Their consolidation services are available in all 50 states, and anyone can cancel any time within 3 business days, for no fees or penalties. The startup fee is higher than average at $69, but Consolidated Credit is a reputable company. This positively rated company has been in business since 1993, and has served over 5 million customers. For unsecured debt, this A+, BBB-rated company is worth looking into.
With a free consultation, and certified debt counselors, Debt Wave is a solid option to explore for unsecured loan debt. The company offers a streamlined debt consolidation process, and monthly fees are affordable — at $49 per month. Customers can enjoy a 7.63% interest rate on consolidation loans, program transparency, and a well-established company track record. It is important to note that Debt Wave is not licensed in CO, KS, MD, or NY. Additionally, startup fees can get up to $75. But across the board, Debt Waved is highly favored among customers. The company is A+ rated, and accredited with the BBB.
When Is It Best To Consolidate?
Debt consolidation is best for those who are feeling overwhelmed by debt. It can be a helpful way to organize multiple credit loan debt into one convenient monthly payment. This system is ideal for people who have a lot of unsecured debt, and want to pay it down without entering bankruptcy. Additionally, a consolidation program is a good route to go when one is struggling to stay ahead, and are faced with high interest rates. Or, when it seems like there are perpetual automatic withdrawals from one’s bank account. Consolidating allows people to pay off their debt faster, without avoiding credit damage.