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Debt Reduction Program

You're up to your eyeballs in debt, and you need help right now. What do you do? One option is to consolidate all of your debts and make one monthly payment to your creditors. There are a few important benefits to this approach, and many companies in the marketplace that can help you pull this off successfully. While you don't need a debt consolidation company to consolidate your debts, working with a company could actually lower your overall debt as well as the interest rate you're paying along with the total monthly payment. Here's how a debt reduction service can help you:

Debt Reduction Services Can Cut Deals When You Cannot

Many debt consolidation companies have established deep and meaningful relationships with thousands of creditors. These are relationships you don't have. Because a debt reduction company's sole existence depends on consolidating debts and reducing debt levels for its customers, many of these companies have developed specialized processes for negotiating with creditors.

For a fee, a debt consolidation company can often reduce your total debt, as well as monthly payments, to levels you would be unable to match on your own. Even with the fee paid to the consolidation company, you could end up saving yourself thousands of dollars in interest over the life of your loan.

Technically, you don't need to work with a debt consolidation company. The actual process of consolidation is simple in form: you write down all of your debts, you approach lenders for a loan, then you pay off all of your debts and make a new monthly payment to your new lender. The payment might be lower if the interest rate is lower and the term of the loan is longer than the average term length of your previous loans.

However, if you turn the process over to a debt reduction company, the process is greatly simplified. You hand over your financial information to the company, it seeks out the best consolidation loan for you, negotiates with your creditors, distributes the money, and helps you get out of debt faster than you could on your own. All you have to worry about is one monthly payment to the debt reduction company.

Your Overall Debt and Monthly Payments May Decrease

One of the most amazing things about debt consolidation is the fact that your monthly payments, as well as your total debt size can decrease substantially. If the company you're working with can negotiate a lower total debt balance, and get you a decent interest rate on your new loan (or arrange a settlement option), you're going to save a substantial amount of money.

For example, if you have several loans that look something like this:

  • $5,000 @ 4%
  • $4,500 @ 6%
  • $5,000 @ 10%
  • $1,000 @ 24%

then your average interest rate is then your average interest rate is: 11 percent. If the debt reduction company can get an interest rate that is lower than that - say 9 percent - this is a step in the right direction. What your debt reduction company needs to do to make this a great deal is to also ensure your debt payments are lower than before and that your total debt is lower than before. If it can do either of those (or both), then the deal is a slam dunk.

Something To Consider

Debt consolidation doesn't always work, and debt settlement often makes it difficult to obtain credit int he future. Before you sign up for any program, ask the company you're working with what all your options are, and whether it has a backup plan in place in the event the consolidation doesn't go through or the interest rates and payments are not favorable. Finally, make sure you get full disclosure of all of the fees you'll be paying and how you'll pay for them. At the end of the day, you should be put into a better financial position, not saddled with more obligations and onerous fees that you can't afford to pay.