About Debt Consolidation

Debt consolidation is the combining of all your monthly bills and high interest loans into a single monthly bill, and thereafter using a Debt Management Plan to pay of past debt, whilst managing to stay within monthly expense guidelines

How Debt Management Plans [DMP] Work

In a DMP, a schedule of monthly payments is developed between the DMP organisation, you, and your creditors.

You then deposit money each month with the credit counseling organization.

The agency uses your deposits to pay your unsecured debts, such as credit card bills, student loans, and medical bills, according to the payment schedule.

What Makes a DMP Successful

Creditors will often agree to lower interest rates or waive certain fees, to help repayment of your outstanding debt. Check with all your creditors to be sure they offer the concessions that a credit counseling organization describes to you.

A successful DMP requires you to make regular, timely payments, and could take 48 months or more to complete.

You may have to agree not to apply for — or use — any additional credit while you’re participating in the plan.

Dangers of Debt Consolidation Plans

DMP loans generally require you to put up your home as collateral. If you default on the payments in any way, you could lose your home. This is where Cash Advances or Payday Loans are a better deal for the client.

The costs of consolidation loans can add up. Typical charges include:

interest on the loans, PLUS
“points,” where one point equals 1% of the amount you borrow.

Debt consolidation might not be the answer to your problems.

Counselors will provide you with a free budget analysis to help you determine if the debt management program is right for you.

Choosing a Credit Counselor - The FTC works for the consumer to prevent fraudulent, deceptive and unfair business practices in the marketplace

NEXT: Benefits of Debt Consolidation Loans

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