What Does A Debt Consolidation Service Do?
What exactly is a debt consolidation mortgage? Sometimes when you take out another loan, another debt is often outstanding which is sometimes considered unsecured. Rather than paying off the previous loan, you’re simply replacing it with a brand new one at a much lower rate. The new loan itself may have a longer payment term, meaning that you’ll wind up paying even less in the long run overall.
Usually when you first sign up for a debt consolidation program or service, you’ll be offered a lower interest rate than you are currently paying on your credit cards and other such debts. This is actually good news. As the old saying goes, “If it’s too good to be true, it probably is.” You might find that after a while your new, lower rate debt consolidation loan shrinks to nothing. This is actually a good thing, because if your credit card company ever drops your rate below what you were paying before, then you’ve just saved yourself a bundle.
On the other hand, if you have a solid credit management plan in place, then a debt consolidation mortgage can help you avoid some of the high fees associated with credit management programs. Typically, many of these programs require that you make several set payments that are almost always quite small. In fact, the fees charged by credit management companies and their affiliates for making these payments can be downright ridiculous. You can avoid this altogether by establishing a strict budget that you’re going to follow.
A debt consolidation service or program involves taking your existing debt and lumping all of it together into one package. Scottsdale debt relief professionals will work directly with each of your creditors to establish a payment plan that will require you to make just one payment every month. This means no more juggling of multiple credit cards, late fees, over-limit fees, and all of the other issues involved in paying multiple bills. Instead, when you make your payment on a monthly basis, you’ll only have one bill to worry about.
This type of debt consolidation service involves taking out a loan. The difference between paying multiple debts with a credit card and a loan is that the former requires you to make regular monthly payments. On the other hand, the latter involves taking out an unsecured loan with which you pay off all of your debts. This loan will have to be repaid, and in turn, your credit score will suffer accordingly.
What’s more, late fees and over-limit fees are not incurred by those who go with credit debt relief professionals. Instead, you’re simply charged a flat fee for making your payments on time. This flat fee is known as the service charges and can range from a few dollars per month to a few thousand dollars, depending upon how much debt you’re paying off. In addition, you may be required to make monthly deposits into an account managed by the credit debt relief company. These are funds used to pay off your creditors in order to ensure their financial stability. Needless to say, it’s a great deal that certainly will save you money in terms of both interest and fees over the long term.