Debt consolidation companies offer debt settlement in the form of debt management plans. These plans help people in debt to get lower minimum payments with lenders. They settle the loans by settling for a lower balance and interest on the debtor’s account. Debtor needs to pay the consolidated debts to the debt settlement agency every month. The agency in turn pays the creditors on the debtor’s behalf. If a customer is enrolled in a debt consolidation program the creditor will close the debt account immediately. This increases the credit utilization rate which can affect the credit total. Lender must include a notification to the account indicating the account is being supervised under a debt consolidation agency.
Debt consolidation may help reduce the monthly bills as one is not paying full debts. But you must check out the reviews of such companies before proceeding. For example, among many debt consolidation companies, credit9 reviews do not seem positive for customers. Creditors might report credit accounts as settled or completely settled for a lower balance due to consolidating debts. Check the debt amount rightly to see if it’s eligible for the program. After having enrolled in a debt consolidation program one is not required to respond to making payments. The company would respond to it. One will need to definitely monitor the whole though.
Keeping tab of the payments in case there is a delay. Because if the debt consolidation agency delays payment it would reflect on the credit report affecting the credit score negatively. So make sure to research well in advance about the company before enrolling to the debt consolidation plan. Doing research on the offer helps in the long run. Ensuring that the debt consolidation company is reputable and practices fair terms and trade is of utmost importance before enrolling for the program.