Debt Management: Definition:

"When a consumer consolidates all unsecured debt into one lump sum. This is often done to reduce minimum payments and interest rates. Debt management works to adjust the minimum payments and interest rates only, and not the actual balances."

Debt Management - Frequently asked questions and answers

When making a financial decision about your future it is wise to ask questions. You should never go into a debt program without understanding the positives or negative that it may have. Knowing what to expect is always a wise way to entering into any type of financial program.

What will this program do to my credit score?

Debt consolidation programs do not harm your credit score. In fact the debt consolidation program is the only debt program that will not harm your credit score. There are no negotiations of ones balances this is simply an easier way to get the debts paid off without paying all of that interest. This debt program will actually start to improve one’s credit score because the minimum payments will start going toward their balances and not towards interest rates. When the balances on the debts start to go down your credit score will start to improve.

Is it hard to qualify when applying for a debt consolidation program?
No, this is not a loan so you do not need to apply. There is no collateral involved when consolidating credit card debt. Qualifying for debt consolidation is very simple. The consumer must have at least three thousand dollars in current or semi-current debt. Each balance must be at least one hundred dollars each. Their interest rates must be twelve percent for each creditor or average twelve percent when combined.

What debts am I allowed to consolidate?

Any debts that are not secured can be included into the debt consolidation program. Only unsecured debts can be included, unsecured debt are debts that are not tied to any assets or collateral. Unsecured debts are basically credit cards, unsecured loans, department store cards and more. Secured debts are usually your home, car or property.

What types of fees are there in the debt consolidation program?

There is usually a monthly fee or a first month fee but every company is different and it is wise to ask. Any reputable company does not have any hidden fees, interest fees, late fees or pre-penalty fees. Make sure that you know what it is that you are being charged. If you find a responsible company they usually charge the first payment and a low monthly fee. Keep in mind that you will be saving a lot of money by doing debt consolidation so these small fees will probably not affect you.

How long do these programs usually take before the debts get paid?

One thing is for sure, it will be a lot sooner than what you are currently doing. If you currently have a debt amount of $30,000.00 you will be paying it off for at least 25 years or more. When doing the debt consolidation program it takes anywhere from 12 to 48 months. There is always an option to pay more without any penalties in order to get the debts paid sooner. This is entirely up to the consumer, but it is nice to know that they have the option.

 Debt consolidation and the positive effect it has on your finances

Debt consolidation is a very beneficial program for all consumers who have unsecured debts. We are paying tens of thousands of dollars on interest rates and getting nowhere fast. It is impossible to pay off our debt because we are paying towards all of the interest first. In actuality we would have to pay at least three to four times as much money each month to see our principal balances go down. This should be illegal, but it is not and we have to deal with it or do we? Credit card debt consolidation is the only way out of this situation unless you just won the lottery or have a rich family member who has decided to pay all of your debts off. This is usually not the case and we need to figure our way out on our own. We are usually afraid of the unknown so we simple think we are stuck in our situation, like that saying “you made your bed now lie in it’. Not anymore, debt consolidation is the one program that is designed to help those consumers who feel that they have no other alternative but to pay the debt with the interest.

Debt consolidation is the only debt program that is not factored into your credit score. Debt consolidation has no negative effects when it comes to your credit, it will actually improve your credit in time. There is no settling of one’s debt balances, the debts are being paid but the interest is eliminated to a lowered amount. The interests that are being charged from the creditors is compound interest. Compound interest is charged on a daily basis and keeps charging and charging. When doing the debt consolidation program this interest is lowered and not compounded on a daily basis. When your minimum payments are made it will start going towards the principal balances where it belongs. Once the balances start to go down your credit score will start to climb upward. Debt management companies are usually able to get the consumer a lower payment, making it more affordable for the consumer. If at any time the consumer wants to pay more money they are able to without pre-payment penalties. Not having all the interest when you are paying more it too will goes towards the balances. This will get the consumer out of debt sooner than they expected.

The debts that you are able to consolidate are debts that are not secured to any assets. Secured debts are usually your car, property or home because you have to have collateral to receive them. Any debts that are not secured are able to be included into the debt program. These debts are usually credit cards, department store cards, line of credit, personal loans and many other type of debts that are not secured. They debt consolidation company that you work with will provide you with all the information that is needed to be on your way to debt freedom.