credit counselling
Debt consolidation when your credit is poor and you have been declined that consolidation loan
If you have high credit card debt, bad credit and have been unable to get a consolidation loan from your bank, there are options for you to solve your finance issues.
Credit counselling companies exist to allow a debtor to consolidate debt repayments, allowing for an easier life and getting you debt free much faster.
Lets look at an example:
Pam and Mike are struggling to make the minimum payments each month of the following unsecured debts:
| Total Debt | $35,000 |
| Minimum Payment | $1,050 |
Currently, just paying the minimum amount each month would take them around 30 years before the debt is gone. This is because the average APR is 19.9%
Pam gets Mike to call our office and talks to a counsellor. Embarrassed about their situation Mike finds it hard talking, but is reassured when the counsellor explains how many people out there are carrying this kind of credit card debt.
The counsellor details what kind of payment plan they can put them on. Mike feels somewhat relieved at the proposal. Their monthly payments are reduced for a program lasting a total of 54 months:
| New monthly payment | $750 |
This saves them a total of at least $16,188 over the 54-month life of the program, and they will be debt free.
Credit counselling and how it works
Credit counselling uses a program called debt management. When joining a program your counsellor acts on your behalf and contacts each of your creditors explaining your situation and negotiates for interest relief. The interest relief is what gets debtors out of debt so fast. Effectively the interest is stopped (or reduced), making your payments go to the principle debt and not to the interest.
The debtor’s life is then made simpler by paying a consolidated amount to the agency.Part of your monthly payment is a small percentage that the agency take.The remainder is distributed to the creditors, weighted accordingly on the outstanding debts.
Summary
Debt Consolidation options are out there if you have bad credit and can’t get that loan. There are downsides to debt management but in reality they usually far outweigh carrying a large amount of debt over a period of time. Try talking to a credit counsellor today to find out more.
Consolidate Your Credit!
