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29 Debt consolidation FAQ

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By: ruthgibson
on 30th Jul,2013

1. Interest rates may also be reduced. After the completion of your IVA, rest of the amount is waived off. Know more...
29 Debt consolidation FAQ


1. What is Debt consolidation program?

Debt consolidation is a way by which you can consolidate unsecured debts into a single manageable payment. The purpose is to negotiate with your creditors and reduce the interest rates or waive off late fees so that you're able to manage your debts better. Know more

 

2. How many types of debt consolidation are there?

There are different ways to consolidate your debt depending upon your circumstances. They are:


a. Debt consolidation loan: A new loan is taken out and it can be used to pay off multiple existing debts. By doing this you’ll have to make just one monthly payment, instead of many.


b. Debt management plan: It’s a consent between you and your creditors in which your debt is reduced to an affordable level. Interest rates may also be reduced.


c. IVA (Individual Voluntary Arrangement): Under this method, you agree to pay as much as possible for an agreed period of time, normally 5 years. While you’re on IVA, no interest or charges can be added to your debts. After the completion of your IVA, rest of the amount is waived off.

 

3. How do I know which is the right option for me?

The correct solution for you will depend upon a number of things like the amount you owe, how many creditors you have, your affordability to pay the debts and the types of debts.

 

4. What are the warning signs that I am too much in debt?

The following signs indicate that you are too much in debt.


a. You're unable to meet the minimum payment on your debts


b. Your expenses exceed your income


c. You have fallen behind on your monthly debt payments


d. You have exceeded your credit limit


e. You have lost track of your monthly payments


f. You're thinking of filing for bankruptcy

 

5. What do I expect after filling out the free counseling form?

Once you fill out the free counseling form, a debt consultant will call you up for a free debt counseling session. Know more...

 

6. How long after I fill out the free counseling form will you contact me?

You will be contacted within 16 working hours of filling out the free counseling form. We shall contact you either by phone or through mail.

 

7. What debts can I include in the consolidation program?

Debt consolidation program includes unsecured debts such as unpaid medical bills, credit card debts, utility bills, store cards, gas cards, and personal loans. It does not apply to secured debts.

 

8. Can I choose the debts that I want to consolidate?

Yes, you have an option of choosing which debt you want to consolidate through a debt consolidation program. You may leave out one or two debts, or you can pay all.

 

9. How do I know if an account is in collection?

Your credit report can tell you if your account is with the creditor or sent to collection. You can pull your credit report from any or all of the credit bureaus such as:

www.experian.com

www.transunion.com


www.equifax.com

 

10. Can you help me if I have late payments?

Yes, we'll be able to help you even if you have late payments or haven't made any payment at all. Once you enroll for the debt consolidation program, you can pay off the dues and get current on payments.

 

11. How secure is my personal information?

We value your privacy and assure you that your personal information will not be disclosed to any unrelated third party. Check out our privacy policy for further details.

 

12. How much should I pay for debt consolidation?

You need not pay anything for the counseling session. If you are satisfied with the free counseling session, you can avail our services at an affordable fee.

 

13. How can debt consolidation simplify my monthly payments?

While using debt consolidation, all your debts will be replaced with one single debt with lower interest rates. Instead of paying different amounts to different lenders, you will need to make a  fixed single monthly payment. This surely helps in simplifying your monthly payments.

 

14. Does debt consolidation affect my credit score?

Debt consolidation program has a positive impact on your credit score as it helps you make regular payments towards your debt.

 

15. Is Debt consolidation good for me?

Consolidation provides you with benefits such as reduced interest rates/ monthly payments or late fee elimination. As such, it is a good option for those willing to get debt free. Go through the 8 benefits of debt consolidation.

 

16. What is a debt consolidation loan?

It is a kind of personal loan that helps to pay off debts through a single payment. After you have paid back the debts, you're only left with the debt consolidation loan which requires a single monthly payment.

 

17. What is a secured consolidation loan?

A secured consolidation loan is acquired against any collateral such as house, jewelry, car or any asset. The loan is secured by the collateral. If the borrower is unable to repay the loan, the collateral is seized and the creditor sells it off to recover the loan.

 

18. What is an unsecured consolidation loan?

An unsecured consolidation loan is not collateralized by a lien on specific assets of the borrower.

 

19. Which one is preferable as a consolidated loan - a secured loan or unsecured loan?

The preferability of secured or unsecured loan totally depends upon your financial situation. A secured loan will have low interest rates and will help you to pay off the loan within your monthly budget. At the same time, if you’re not able to pay off your installments then your collateral will be seized.


On the other hand, unsecured loan involves a longer repayment plan and you end up paying high interest rate. Unsecured loan is quickly available by the lenders. There is no risk of losing your house or any other asset if you take out an unsecured loan.

 

20. Can I use the loan taken out for debt consolidation for any other expense?

The preferability of secured or unsecured loan totally depends upon your financial situation. A secured loan will have low interest rates and will help you to pay off the loan within your monthly budget. At the same time, if you’re not able to pay off your installments then your collateral will be seized.


On the other hand, unsecured loan involves a longer repayment plan and you end up paying high interest rate. Unsecured loan is quickly available by the lenders. There is no risk of losing your house or any other asset if you take out an unsecured loan.

 

21. Do I need to own a house to consolidate my debt?

It is not necessary to own a house to consolidate your debt. An unsecured loan is available if you do not own a house or any other asset.

 

22. What are the benefits I get from debt consolidation program?

There are many benefits of choosing a debt consolidation program:


a. All bills are consolidated into one single payment.


b. Interest rates are lowered.


c. You get rid of debts early.


d. Harassing calls may be avoided.

 

23. How much can I save by consolidation?

You can calculate how much to save by using the debt calculators.

 

 

24. How fast can I get debt free?

This will depend upon the minimum monthly payment you can afford. The higher your monthly payment, the faster you'll get debt free.

 

25. What happens to my credit card?

The last thing you want to do is increase your debts. Most probably the company which provided you loan will close your credit cards to make sure you don’t continue to acquire debt.

 

26. What is the maximum time limit within which I can repay my loans?

This completely depends on you and the creditor. Your monthly income and the amount of repayment per month are the key factors in deciding about the time limit. Also, how much time the creditor gives you is important. Mostly the time frame is 3-5 yrs.

 

27. After consolidating debt how long does it take to see an increase in credit score?

It depends on your consistency of paying debts. Although, it takes minimum 2 yrs to see an increase in credit score.

 

28. Bankruptcy or debt consolidation - which one is better for your credit?

Bankruptcy should be your last resort as it affects your credit score badly for many years to come. Although, it depends on your financial condition what to choose. If you’ve an option of debt

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