Debt consolidation program overview

These programs were designed primarily for consumers whom are current with credit card debt. It's important to understand that the consolidation program was designed for the consumers, by the creditors. These programs are not forced upon the creditors by companies who provide the services. If you’re a consumer whom just started to fall behind but are no later than 90 days delinquent, you can still enter the debt consolidation program.

The debt consolidation option is considered the only program that is not factored into the consumers credit score. According to FICO, it states Whether or not your participating in credit counseling of any kind”. That is exactly what debt consolidation is, credit counseling. It does not opt the use of loans, which require home ownership. What it does, is uses nonprofit debt relief providers to redirect minimum payments to the creditors but on new terms that consumers cannot obtain themselves directly. When considering a debt consolidation program, these services are often administered by 501(c)3 nonprofit agencies.

In summary, we will begin to explain some of the key benefits to a consolidation program and how consumers can learn how to get out of from credit card debt. The program benefits vary from the reduction of minimum payments, to the reduction of interest rates. Let's begin.

Top 3 benefits to the debt consolidation program

The reduction of minimum payments

The average minimum payment creditors tend to want, is at around 3%. So given John Doe has a balance of $10,000, the minimum required would be $300.00. When entering a debt consolidation program, the creditors are more willing to work with companies to lower minimum payments as opposed to the consumers directly. If looking to lower the minimum payments, our assumption is that your not paying two or three times the minimum payment which is what you should be doing. The good news however, is that given you enroll into debt consolidation you will see your balances go down by paying just the minimum payments (due to the newly revised interest, do read on).

The average consumer interest rate is at around 19.99%, which not only is high but is compounded daily. For a better understanding of compound interest, it’s best to flip of your statements and start reading the fine print. 

In addition to this high compound interest, given a consumer misses one payment (despite being current for years), they can and will find reasons to bump it up to something ridiculous. The intentions here, are to issue 0% introductory interest cards with a zero balance. Most consumers get near their credit limit, within the first month of ownership. It’s only when the balances are high, that they tend to increase this rate to something ridiculous, usually at 19% or higher.
To combat these high interest rates, debt consolidation would be an excellent way to reduce the interest. If you call the creditors directly, you may be able to get on some type of internal hardship program and that’s only if you get lucky.

The late, limit and other finance charges simply need to stop. Why make a minimum payment of $100.00, when you have two sets of $35.00 fees (one for a late fee, one for an over limit fee)? It almost makes making the minimum, impossible. It’s for this reason as to why consumers wake up years down the road, only to see the balances at similar figures they were the years prior. Debt consolidation can reduce or even eliminate the typical fees which are often encountered when making the minimum payments on your own.

Although the debt consolidation program is designed for consumers whom are current, if you fall within the 0-90 day delinquency stage, this benefit may be for you. For the selected few whom are behind, after a few consecutive payments these creditors are willing to re age the accounts to a more current status. This will help when trying to pay off the credit card debt.

Tips on how the debt consolidation program can save money for the consumer

These programs were created for one reason and one reason only, and that’s to save the consumer money. The fact of the matter is, most consumers have made minimum payments for years on end only to wake up years down the road to find very similar balances. If your just a consumer who was just recently given a high interest rate, then it’s best you seek debt consolidation to prevent a repetitive cycle of endless payments. 

In summary, the debt consolidation programs can either save you money, or they cannot.  It’s that simple. It's always best to go through a free consultation to see if the debt consolidation option would be in the best interest of the consumer or not. After learning about the program, consumers will save a great deal of time and money when trying to get out of debt.

Additional information on the debt consolidation program may be found on the recent wordpress blog recently posted. As always, when considering credit card help it's advised to seek professional advice.