by Michael J Brazier,
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UNITED STATES, May 06 — It’s easy to become a bit confused when trying to find a reputable nonprofit Debt Consolidation program where the counseling services will actually get you out of debt and improve credit over time. If you have accounts that are current or past due less than 6 months a consolidation plan can help you save thousands in interest and improve your credit rating over time.
These frequently asked questions will help guide you down the right path to financial freedom and better explain the ins and outs of a debt consolidation program with a nonprofit organization. Another 30% of your score is affected by the amount of debt you owe
I
t’s easy to become a bit confused when trying to find a reputable nonprofit debt consolidation program where the counseling services will actually get you out of debt and improve credit over time. If you have accounts that are current or past due less than 6 months a consolidation plan can help you save thousands in interest and improve your credit rating over time.
These frequently asked questions will help guide you down the right path to financial freedom and better explain the ins and outs of a debt consolidation program with a nonprofit organization.
Do I need a certain amount of debt to qualify? No. A true nonprofit organization will consolidate any amount of debt if there are potential savings found in the free consolidation consultation. Agencies requiring a certain amount of debt are for profit and sales agents make a hefty commission off large debt amounts, not small ones.
Will the creditors require I close all my accounts. Yes. Any account consolidated will have to be closed either before enrollment or in the enrollment process. They key to a debt consolidation program is to get out of debt.
Do I have to consolidate all my debts? No. You can choose which accounts you want to consolidate. Some creditors do require that all accounts be enrolled if theirs is in the program but the stipulation is few and far. A certified credit counselor will encourage you to close all accounts as the end goal is to get out of debt, but again, it’s not required.
Do you reduce my balances or payback the entire debt? A consolidation program pays back the full debt amount at reduced fixed interest rates. A settlement program pays back part of the debt but requires accounts to first charge off, leaving your credit tarnished for seven years with multiple negative marks.
Are my payments sent each month? YES. This is how you’re kept current and helps maintain and increase your credit score over time. Remember, timely payments account for 35% of your credit score so it’s important for a non profit organization to ensure such is maintained for you on the accounts consolidated.
How low do the interest rates drop to? This depends on the creditor as each have their own guidelines for consolidating debts with non profits. Typically, the APRs go anywhere between 0% and 10%, depending on the creditor.
How long will this take me to be debt free? A consolidation program is designed to get you out of debt in 5 years or less. A good non profit will allow you to pay off the debt faster as able without any additional fees.
Is the due date changed with my creditors in this program? Yes. A nonprofit consolidation org will allow you to select a due date that fits comfortably around your other monthly bills and pay schedule. This date is then modified with the other terms once enrolled into the program.
Who handles my creditor and collection calls? There should be customer service department if not an assigned certified credit counselor to manage your creditor calls. The customer service department should be –in house – and available during normal business hours so they can contact your creditors on your behalf.
How will I know my creditors are being paid? You’ll still receive your monthly statement from your creditors that show the payments being made on your behalf. A consolidation org can usually provide a breakdown of the payments as well if you do not receive statements from your creditors.
What happens if I miss a payment? A nonprofit agency should not charge you for missing a payment or making a late payment. A creditor on the other hand may take a missed payment as an opportunity to default back to the original rates and terms you had before consolidating.
What’s a financial analysis? A financial analysis, or budget counseling session, outlines your debt to income ratio on a monthly basis. This is done to ensure an affordable monthly payment is provided on a due date that works around your other monthly bills.
How will this affect my credit? A debt consolidation plan can improve your credit score over time. 35% of your credit score is contingent upon consecutive timely monthly payments. Another 30% of your score is affected by the amount of debt you owe. So by having a consolidation company make your payments for you at reduced interest rates you automatically help influence 65% of your credit score with timely payments that reduce your balances faster, at lower fixed APRs.
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