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Is It Illegal To Use Debt Consolidation Programs?
By LaMesaDuiLawyer | March 13, 2010
Everywhere you turn you see debt consolidation programs being advertised with the promise of eliminating your debt fast. Anyone who has been unable to pay their creditors and have bill collectors hounding them daily will be attracted to these ads.
There are many different types of debt consolidation services and each will have unique impacts on your credit score. The services are legal but can make problems on your credit report that are hard to repair.
People who have gotten behind on their bills and who are not able to get caught up most likely already have noticed their credit score dropping. These are the clients who use the debt consolidation management programs. The programs are created to remove your debt problems quickly. An account agent will negotiate with your creditors and convince them to allow you to pay them off with much less than what was owed. You can save a ton of money with this service and since your credit was already declining due to non payments it will not make much difference to you that your credit score drops.
People who are attempting to improve their debt to income ratio or simply remove high interest rate debt in hopes to increase their credit score will want to stay away from the debt consolidation management type of programs.
If someone is attempting to enhance their credit situation or requiring help to consolidate their high interest debts to a smaller interest loan should only consider a debt consolidation loan. A debt consolidation loan offers lower interest rates than you may be paying with your credit card companies or other unsecure debts. These loans are intended to allow you to pay off your old high interest debt leaving you with one low interest payment. Engulfing your high interest debts into a low interest consolidation loan you possibly save thousands of dollars of interest payments.
Although debt consolidation has been given a poor reputation and some people are afraid of it, there is more to it. The fact is debt consolidation can be very helpful for many people who without it would have their credit ruined entirely.
According to your financial situation it will dictate which debt consolidation service is right for you. Applying for mortgage loan or trying to eliminate high interest rate debts will normally only has the consolidation loan as an option. The other types of debt consolidation services or programs are going to leave negative marks on your credit report and will deflate your credit score.
A debt consolidation loan has no negative effect on your credit report and may even be able to increase your overall credit score. Since you are paying back 100% of your debt with the debt consolidation loan you will stay in good standings with all your creditors. The accounts you paid off in full can be closed or left open in order to protect your credit history length.Â
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