The Cost of Debt Consolidation
How Much Does Debt Consolidation Cost?
For people facing significant debt, credit consolidation may be the best solution in order to manage those debts in a stress-free manner. Those owing more than $5,000 in consumer debt like credit card balances, unpaid medical bills, outstanding loans, judgments, and other debts may be able to benefit the most from the solutions that credit consolidation offers. But how much does it cost to take advantage of debt consolidation programs?
Start by Talking to a Debt Counselor
As part of most debt consolidation programs, debt counselors provide free counseling to help consumers make the best decision on what form of consolidation program they should do for their very unique circumstances. Debt consolidation is not a one-size-fits-all solution. There are many ways to approach and manage debt to get the best results.
Consider a Consolidation Organization
One possible low cost option is using a debt management program through a consolidation organization. Each month, based on the amount of debt to be repaid, you are required to make a payment to cover the total of the negotiated payment amount. This payment is often required to come directly out of a bank account in the form of an auto draft. This makes debt repayment basically worry-free. In addition to handling the payment, debt counselors will negotiate with creditors to get the debt reduced by as much as 30-60% so that your total debt is much lower and will be reported as less on your credit report. This also makes your payments much lower than if you were trying to do it yourself by making minimum monthly payments. The debt consolidation company then charges a small surcharge to cover their staff needs, generally around $25 a month.
Debt Consolidation Loans
Another option is to take out a debt consolidation loan, pay off the total sum of all negotiated debts at once and then just repay the debt consolidation company monthly. This will get rid of the outstanding debt quickly on your credit history, but you will still be responsible for repayment of the loan, plus any service fees and interest, which may range from 5-18 % of the loan itself depending on your circumstances and credit score. This can be a great solution if you want to eliminate calls from creditors and improve your credit history quickly.
Other Options to Consider
There are also other programs to help you manage debt with less stress. Monthly bill consolidation is great for people who experience cash flow problems during the month, such as those on fixed monthly incomes or those receiving monthly settlement payments. In this case, the debt consolidation firm can work with utility companies and creditors to arrange for a payment plan. You will then be responsible for paying one set fee monthly to cover it all. This is a good way to stay current on all bills and not get behind, a situation that can happen to anyone anytime.
If you are having problems managing the bills and debts each month, you will probably save money by using a credit consolidation program. Many communities have low cost options to help you manage your budget more effectively, eliminate creditors harassing calls and letters, and establish a healthier credit history.
