Instead, the nonprofit credit counseling agencies work with card companies to reduce the interest rate and lower the monthly payment to an affordable level for the consumer.The consumer sends a monthly payment to the credit counseling agency, which then distributes the money to each creditor in an agreed upon amount.If you don’t plan to change your spending habits – i.e.you still plan to use your credit card for anything you want – then debt consolidation is not for you.The repayment period is normally 3-5 years, but how much you interest you are charged is the key element.Lenders look closely at your credit score when determining the interest rate they charge for a debt consolidation loan.If you are falling behind paying off your credit card debt, it’s very likely your credit score is tumbling, too.If the interest rate you get for a debt consolidation loan is not lower than the average interest rate you already were paying on your credit cards (see above), then a debt consolidation loan does you no good.
Learn More About Debt Consolidation Loansnonprofit debt consolidation through a debt management program, which doesn’t require the consumer to take out a loan.
The agency may also get the card companies to waive late fees or over-the-limit fees. Debt management programs usually take 3-5 years to eliminate debt.
If you miss a payment, they can revoke whatever concessions were made on your interest rate and monthly payment.
Debt consolidation is especially effective on high-interest debt such as credit cards.
It should reduce your monthly payment by lowering the interest rate on your bills, making it easier to pay off the debt.
The first step toward making debt consolidation work is calculating the total amount you pay for credit cards every month and the average interest paid on those cards.