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Information on Debt Consolidation Companies

February 23rd, 2009

Quicken Personal FinanceThis article from my debt consolidation pack provides an overview of what this service is, how it can help you, and what its primary advantages are. Meanwhile, if you’re looking for some debt consolidation companies to assist you in reducing your hassles along with your liabilities, you can check out Quicken.com, which can be reached by clicking through on the banner to the left. All you need to do is fill out their simple online form to get started.

A debt consolidation loan simply means consolidation of all your debt under a single lender. This debt is usually secured but in certain cases if the debt consolidation company feels that a person has a good credit standing it may not insist on security.

There are many debt consolidation companies in the market that will negotiate with your lenders and close the outstanding debts that you have with them. Such outstanding amounts are then transferred to the debt consolidation company that has negotiated on your behalf. This strategy is especially useful if you want to repay your debt from credit cards because the rates on these are usually higher than those charged for unsecured personal loans.

Important advantages of debt consolidation are:

  • Reducing the burden of interest and penalties: If the debtor defaults on payment (that is, does not pay the full amount on or before the due date), the lender mercilessly adds interest and penalties on any unpaid amounts. In many cases, the amount of interest and penalties charged by the lender can exceed the total amount borrowed. In such a situation it makes sense to repay the current lender by taking a debt consolidated loan.

    For example, if the person has borrowed $500 from a credit card company and is unable to pay the amount, the credit card company may charge up to $400 for non-payment of the principal. What the debt consolidation company will do is that they will pay this $400 penalty first, and then allow you to pay off the principal amount over time. This will reduce your burden of penalties, not to mention the overall time that it will take for you to get out of debt completely.

  • Single payment for debt: Instead going through the hassle of paying to numerous debtors, the borrower is provided with the convenience of paying to one single creditor. Thus you will need to remember only one date of payment. This reduces your burden to a great extent because it will save you lots of time.
  • Reduced rates of interest: As mentioned earlier the rates of interest charged in debt consolidated loans is much lower when compared to rates of interest charged by credit card companies.
  • Effective repayment options: The debt consolidator prepares the repayment plan in a way in which the borrower is left with a certain amount of cash after making the payment on the debt installment. This gives the borrower extra cushion in case of any emergency.
  • Freedom from collection calls: Once a debt is placed under a debt consolidation program, the borrower stops receiving those harassing calls from the current debtors.
  • Improvement in credit report: With late payments, defaults, and charges removed from your credit report there is bound to be a considerable improvement in your credit rating.
  • Deal with good companies: In debt consolidation the borrower has to deal with a single company that understands what the borrower is going through. Dealing with companies and people who actually understand your problem is much easier than dealing with companies that are relatively harsh and only think about their profits.

Of late there have been several concerns raised about the use of loan consolidation. The main cause for this concern is that many people have shifted from short term unsecured debt to long term secured debt. Even though the monthly payment is lower, the tenure of payment and amount paid increases. In a way debt consolidation is only treating the symptoms of the problem but not the problem itself, which is elimination of debt burden on the society.

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