Debt Consolidation FAQ

Debt Consolidation FAQ: What is debt consolidation?

Answer: Debt consolidation entails acquiring one loan to pay off many other loans. Most people are motivated by the following benefits of debt consolidation:

  • Lower interest rates
  • Fixed interest rates
  • Convenience of working with only one creditor
  • Paying one amount you can afford
  • Satisfying creditors
  • Stopping harassment from creditors

Most often, debt consolidation converts many unsecured loans into one secured loan against an asset, such as a house. However, debt consolidation could, by definition, convert many unsecured loans into one unsecured loan.

 

Debt Consolidation FAQ: Are debt consolidation programs the same thing as debt management programs?

Answer: Many debt relief companies make understanding debt services difficult because they use the same language to describe debt consolidation and debt management programs.

Technically speaking, debt consolidation and debt management are not the same services. However, it is very common for debt relief companies to refer to debt management programs as debt consolidation programs. The reason debt companies use the terms interchangably is consumers are more familiar with the term debt consolidation.

 

Debt Consolidation FAQ: What is the difference between debt consolidation and debt management programs?

Answer: Debt consolidation programs require an entity, most likely a bank, to purchase all of your debt. Then, the new lender allows you to pay off one consolidated debt at a payment amount you can afford, usually with a secured debt (house) as collateral.

Unfortunately, at this time, there are virtually no entities or banks providing these types of debt consolidation programs.

In contrast, debt management programs are available and provide the same benefits as debt consolidation programs of the past. In fact, in many ways debt management programs are superior. Instead of barely paying down the interest on your debt, let alone the principal, debt management programs renegotiate your debt with creditors and create a debt plan you can pay off completely. The cost of the debt services is part of the debt management plan, so you are not increasing your debt burden.

Click here to read frequently asked questions (FAQs) about debt management.

 

Debt Consolidation FAQ: How do I know which debt relief program is right for me?

Answer: Your debt consultant will discuss the details of each debt program and together you will determine the right debt relief plan for you and your family. Every person’s financial situation is different. Please note: this website will not connect you with a debt relief consultant.

A debt consultant helps you choose the right program and understand why it is the best option for your debt relief.
 

Debt Consolidation FAQ: Will debt consolidation stop collection agencies from calling and harassing me?

Answer: Yes, debt consolidation can stop harassment from collection agencies.

After your first payments post-debt consolidation, calls from collection agencies should cease. If collection agencies continue to harass you, your debt consolidation company may use the Fair Credit Report Act, a Federal law, to force collection companies to stop contacting you at home and work.

 

Debt Consolidation FAQ: Is debt consolidation the same as declaring bankruptcy?

Answer: Absolutely not. Debt consolidation programs help people pay what they owe and participants have the ability to obtain credit in the future. Bankruptcy is designed to absolve you of all obligations and results in long-term negative credit status.