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Being heavily in debt can feel like you’ve been attacked by a giant octopus that’s wrapped its tentacles around you and is squeezing you like crazy – until you just want to yell out, “Stop, you’re crushing me!” If this is how you feel, you might want to schedule a debt consolidation review.
What is a debt consolidation review?
There are literally dozens (or maybe more) debt consolidation companies and each offers a debt consolidation review. In general this means you give the company or agency information such as your name, address and amount of unsecured debt. The agency reviews this information and then provides you with a plan that can help you eliminate your debt.
Three types of debt consolidation companies
There are basically three kinds of companies that provide debt consolidation reviews. The first are agencies that simply help you create a plan. In this case, a credit counselor will first ask questions to you estimate how much money you spend monthly. He or she will then compare these expenses with you monthly income. It will be surprising if there isn’t a shortfall between the two. Given this, your counselor will recommend ways for you to cut back on your expenses, increase your revenue or even restructure part of your debt.
The second type of debt consolidation agency is where your credit counselor not only helps you create a plan for paying back your debt but then works with your creditors to implement the plan. You consolidate your payments into one payment that you send to the credit-counseling agency every month. This money is distributed to your creditors. You usually get lower interest rates – so you can get out of debt faster.
While this type of consolidation does not reduce your debt it can make your life much less stressful, as your creditors will no longer be calling you at all hours demanding payments. Plus, there’ll be no more late payment fees that can balloon your debt.
Debt consolidation loans
The third type of debt consolidation you may be offered as the result of your review is a debt consolidation loan. This is where you swap your “unsecured” debt such as credit card debt or medical bills for “secured” debt. You will need to provide collateral to secure the loan, which in most cases will be your house.
A debt consolidation loan can lower your monthly payments considerably but it's important to remember that if you default, the bank or whoever else provided the debt consolidation loan can force you to sell your house to pay it off. If you do decide on a debt consolidation loan, it’s important you understand all its terms and conditions, fees and the interest you will pay. Unfortunately, there are some scam artists out there offering debt consolidation loans that look really good until you read the fine print and find the loan origination charges will be like $1,000 on a $10,000 loan.
Debt consolidation review and a debt settlement company
The one thing that credit counseling agencies and debt consolidation loans have in common is that neither can reduce your principal debt balances. They’re just ways to get credit card companies off your back or realize lower payments - either through a lower APR interest rate or giving you more time to pay. In both cases, you will owe the same amount of money. The only difference is how you pay back your creditors.
In comparison, a debt settlement company such as National Debt Relief ( www.nationaldebtrelief.com) can help you settle your debt for as little as fifty or sixty cents on the dollar. It’s a well-respected company with years of experience negotiating with credit card companies and other lenders. National Debt Relief can also provide you with a debt consolidation review. We strongly recommend debt settlement over other forms of debt relief as it can not only help you get out of debt, it will leave you with more money in your pocket. You must do something. Each day you put it off the more money you lose to your credit card company.