Debt Consolidation Programs in 2024

(Note: Checking your rates will not impact your credit score.)

What Is a Debt Consolidation Program?

Debt consolidation is an effective financial strategy for eliminating credit card debt. It reduces your interest rate and monthly payment so you pay off debts faster. Get free debt consolidation programs’ information over the phone or online.

Debt consolidation takes on multiple high-interest credit card bills and puts them into a single monthly payment for a reduced interest rate. You will save money by paying less in interest and pay the debt off more quickly. Debt consolidation can be done with a loan or without one. It is an efficient, inexpensive way to manage credit card debt through a debt management plan, a debt consolidation loan, or a debt settlement program.If you can’t afford more than the minimum payments on your monthly credit card bills, then a debt consolidation program is an excellent way to take control of your finances.

Types of Debt Consolidation Programs


There are three types of debt consolidation programs:

Non profit debt consolidation
Debt consolidation loans
Debt settlement


The first two are designed for consumers who have income enough to manage their debt, but need help organizing a budget and sticking to it.

The third – debt settlement – is used in desperate situations when the debt has soared to unmanageable levels.

If you are not sure which is the best way to consolidate debt, then contact a non profit credit counselling agency like In Charge Debt Solutions. A certified counsellor will review your income and expenses and help you create an affordable monthly budget before offering free advice on which method of consolidation will eliminate your debt.

“Credit Counselling will develop an action plan that is tailored to your exact needs,” Rebecca Steele, CEO of the National Federation of Credit Counselling, said. “When you’re in debt, you need to understand your budget, what it’s going to take to resolve your debts and how you can put fair, affordable payments in place to achieve that goal. That is what credit counsellors should do for you.”

Options for Debt Consolidation Programs
In Charge, Avant, and National Debt Relief are three types of debt consolidation companies. We will provide you with some pros and cons of each to help you to distinguish between types of debt consolidation companies and how to get started.

Non-profit Debt Consolidation


Non-profit consolidation is a payment program where all of your credit card debt is consolidated into one monthly payment at a lower interest rate than you are currently paying. These companies, referred to as credit counselling agencies, will negotiate lower, affordable monthly payments for you with your credit card companies. Non-profit debt consolidation is the closest thing to a real debt consolidation program. It’s more of a service than what you get with a loan and a pure form of consolidation than settlement. There is a non-profit agency behind you with credit counsellors to answer questions and walk you through financial missteps.

Non-profit debt consolidation is like having a financial advisor who helps negotiate lower monthly payments for all your credit card debts, combining them into one payment at a reduced interest rate. It’s a service provided by credit counselling agencies to help you manage your debts effectively and receive guidance on financial matters.

Non profit Debt Consolidation Pros:


The loan is not being extended so your credit score is not used to determine qualification.
Reduced interest rate-about 8% sometimes lower helps to lower monthly payments.
Credit counsellors help in devising a budget affordable for monthly payments.
Financial education is available to prevent this from happening again.


Non profit Debt Consolidation Cons:


There is no assurance of the monthly payment because of forfeiture of all concessions granted by the creditor if payments are not made on time.$50-$75 for setup fees plus $32 on average a month for the service. But the savings in interest payments should far outweigh the expenses.
You will have to forfeit using credit cards except for one emergency card.

Monthly payment assurance: None Concessions forfeiture consequence: Late payments Cost breakdown: $50-$75 setup fees + $32/month service Interest savings: Outweigh expenses Credit card usage limitation: Only for emergencies


Sign Up


The most convenient method is online debt consolidation or call a credit counsellor for a non profit credit counselling agency such as In Charge Debt Solutions.
Allow the agency to access your credit card debt list and the monthly payment information on your credit report.
Attain information on your monthly income and expenses so that how much money you will have available for credit card consolidation will be known. Be prepared to answer questions concerning your goals and the time frame you are working toward to be debt free.
The credit counsellors will review the situation and inform you if you are qualified for the non profit debt consolidation program. If not, then the counsellor may suggest a loan, debt settlement or may suggest bankruptcy as a means of becoming debt-free.


Debt Consolidation Loan


The most common way to consolidate credit is to take out one big loan and use that to pay off several credit card debts. Because you now have only one loan—a debt consolidation loan—you have one monthly payment, which makes the bill-paying process simpler. But this is tricky. Lenders heavily depend on your credit score as a signal you will repay the loan. If you are having trouble paying credit cards, your credit score may suffer, and there is good reason to be concerned that you will repay the loan. You may even be denied a loan or, at the very least, charged a high interest rate. Beware that application and origination fees can add to the cost of the loan.

Consolidating credit involves taking out a large loan to pay off multiple credit card debts. It simplifies bill payments, but it’s difficult if your credit score is low. It can lead to loan denial or high interest rates. Watch out for additional fees. Consolidating credit involves taking out a large loan to pay off multiple credit card debts. It simplifies bill payments, but it’s difficult if your credit score is low. It can lead to loan denial or high interest rates. Watch out for additional fees.

Pros of Debt Consolidation Loans


Interest rates for loans must be lower than rates for credit cards.
Loans can be applied to any form of unsecured debt.
A single payment per month removes the stress of late payments.


Cons of Debt Consolidation Loans


Your credit score determines your eligibility and interest rates, and having substantial credit card debt could result in a very low score. Loans lack flexibility as they are legally binding, while non-profit debt consolidation and settlement options can be terminated whenever desired. Upfront payment of origination fees, ranging from 1% to 8% of the loan amount, is required for loans.


Sign-Up Process


Make a list of unsecured debts that you would like to consolidate and then add the balance of each (the total amount that you owe) to determine how much you need to borrow.
Check your credit score. If that’s necessary, take necessary steps to get your score over 680. Most likely, that will mean making timely payments for at least three months so that your score goes up if that’s at all possible.
Compare the average interest you pay on those debts to get a reference point. If you have a low credit score, it’s not necessarily true that your interest rate will improve.
Apply to at least three lenders whether it be a bank, credit union, or an online lender, and then compare the terms with one another and what you are currently paying.
Use the loan money to pay off each debt individually.

Cons of Debt Settlement


The creditor is not obligated to accept your offer, regardless of the amount.
Debt settlement is heavily regulated in 12 states, making it difficult to get the job done.
Late fees and interest add to the balance each month until a resolution is reached.
By the time you pay off fees for the service and the late penalties, your net reduction likely will be closer to 25 percent of what you originally owed.
The amount of debt forgiven is taxable income if it is more than $600.


Sign-Up Process


First, you need to list out the debts you want to settle and do the math to calculate the total you owe on each account.
Research at least three debt settlement companies or attorneys – Clear One Advantage, National Debt Relief and Freedom Debt Relief are the 3 largest – and compare the terms for each.
Open an escrow account at your bank. Make sure the account is in your name and you have full control of the money.
The debt settlement company must deal with each credit card account individually. Typically, there must be at least 40%-50% of the amount owed already in the account before the debt settlement company can make an offer.
If a settlement is agreed upon – even if it’s just one account – you must release the money from escrow.

Top Consolidation Companies

By far, consumers have a lot of relief options for debt consolidation programs. But the right choice comes from making an honest judgment about your income and your spending habits, which is a much more scientific way to phrase a budget!

If you can make a budget that truly accounts for your spending, you will be in the best position to figure out how much you can afford each month to dedicate to the end of debt.

Here are some companies that offer different options for debt consolidation.

In charge Debt Solutions


TYPE: Non profit Debt Consolidation

HOW IT WORKS: A credit counselor asks questions about your income and expenses to see if you qualify for a debt management program. If you enroll in the program, you agree to have InCharge debit a monthly payment, which will then be distributed to your creditors in agreed upon amounts. In return, credit card companies agree to lower interest rates to around 8% (sometimes lower), which results in lower monthly payments.

FEES: A one-time setup fee that ranges from $50-$75. Monthly service fee is about $30.

LENGTH OF TIME: 3-5 years with no penalty for early payment.

CREDIT SCORE IMPACT: Typically, credit scores will improve after six months of on-time payments. There will be a drop initially due to closing all but one of your credit card accounts.

Avant


TYPE: Debt Consolidation Loan

HOW IT WORKS: First, you must fill out an application and be approved for a loan. Your income and expenses are part of the decision, but credit score is usually the deciding factor. Avant requires a minimum score of 580 with an annual gross income above $20,000. If approved, you receive a fixed-rate loan and use it to pay off your credit card balances. You then make monthly payments to Avant to pay off your loan.

FEES: Interest rates from 9.95%-35.99%. Origination fee: 4.75%. Late payment fee: $25.

LENGTH OF TIME: 2-5 years with no penalty for early repayment.

CREDIT SCORE IMPACT: Applying for a loan does no damage to your credit score, but if you miss payments, then your score will be harmed. If you pay on time, then your score should improve.

National Debt Relief


TYPE: Debt Settlement

HOW IT WORKS: You must owe at least $7,500 in debt. You set up an escrow account, and you start paying into that account, not to your creditors. Once the money in the escrow account is enough to be worthwhile, NDR contacts each of your individual creditors to try and secure a settlement in which the creditor accepts less than what you owe. If settlements are reached, the debt is paid from the escrow account.

COSTS: 15%-25% of the original debt. The company website doesn’t mention any additional fees.

LENGTH OF TIME: 2-4 years.

CREDIT SCORE IMPACT: It’s a big negative and it stays on your credit report for seven years. Expect your credit score to take a 75-125 hit as your bills go unpaid and your accounts become delinquent.

- Credit score impact: Negative and lasts for 7 years.
- Credit score decrease: Expect a 75-125 point drop due to unpaid bills and delinquent accounts. The credit score impact of enrolling in an escrow account program is significant and lasts for a period of seven years. This is due to the negative effect caused by unpaid bills and delinquent accounts. As a result, one can expect a decrease in their credit score ranging from 75 to 125 points. - Settlement process: If agreements are reached, the debt is paid from the escrow account.
- Costs: Typically amount to 15% to 25% of the original debt.
- Additional fees: Not mentioned on the company website.
- Length of time: Usually takes 2 to 4 years to complete.
- Credit score impact: Significantly negative and remains on your credit report for seven years.

Debt consolidation Guide

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