The Basics of Debt Relief

The basics of debt relief start with debt consolidation. Debt consolidation entails you obtaining a loan from a lender to repay debts. Calling the Better Business Bureau will help you determine if a lender will work on your behalf. Companies with good standing will help you pay off your debts in a short time.

After completing your research and choosing the company best suited for your needs, a contract will be drawn up. The contract gives the company the right to work with creditors on your behalf and to act as a buffer to any collection agencies. The contract also obligates you to pay your monthly payments on time each month.

The debt consolidation contract explains details such as payment dates and the monthly interest rate. It is typical for each individual creditor's payment to increase from $0 to $3 depending upon the amount of outstanding debt. If a consumer has five creditors, this could reflect a $15 increase in overall monthly payments. On the other hand, some debt consolidation companies quote a $15-$25 per month inflated rate to avoid the need for a payment increase. These companies will either decrease the payment after three months, or will simply use the funds to pay down the consumer's highest interest rate card much faster.

The next step of debt consolidation occurs after three or four months of consistent, timely payments. The debt consolidation advisor reviews the accounts and requests each one to be "re-aged" by the creditor. This process can take up to three months, but it is usually granted. By the sixth to eighth month of payments, the consumer's credit report should list all of their accounts as "current paid on time."

Author bio:

Brian Williams, a graduate of the University of Texas at Arlington, has 11 years’ experience writing and editing at daily newspapers in Texas. Having worked his way through college and experiencing the transition to professional life, Brian understands how credit affects people’s lives. Learn more about filing for bankruptcy and credit debt from Brian through Credit Solutions. Credit Solutions is your alternative to debt consolidation.

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