Dec 31 2009
Is It Illegal To Use Debt Consolidation Programs?
Debt consolidation programs are being offered everywhere. Billboard advertisements, radio ads, and even commercials on TV are announcing they can get rid of your bills. The ads are geared towards people who are unable to keep up with their bills and are now being bombarded by bill collectors who are slapping them with huge penalties and late fees.
Debt consolidation services can vary greatly and each type of service will have a different outcome for your credit score. Debt consolidation is legal but it could cause you problems with your credit score if you are not careful.
The fact is if you are not paying your bills on time or have fallen way behind, your credit is already compromised and may not be repairable without help. Debt consolidation management programs are perfect for people in those situations. You can have your debts removed quickly and for less than you owe. Your accounts will all be settled for a less amount by the debt consolidation service. You can save hundreds or thousands of dollars by doing this and since your credit was already declining it may not matter much to you that this will further the damage.
People who only need to better their debt to income ratio or just needing to remove high interest rate debt to increase their credit score should not use the debt consolidation management type of services.
A debt consolidation loan is recommended for those trying to increase their credit score or simply save money in high interest payments. A debt consolidation loan will allow you to transfer all your high interest loans into one low interest loan. This will leave you with one payment with lower interest than you were paying originally on your other debts. It is a smart move to pay less interest on your debts; it saves you money in the long run and can allow you to pay the debts off faster.
There is more to know about debt consolidation than just the harm some of the services can cause. For some people the services are the only way to relieve their debts and get a fresh start. If a debt consolidation loan is taken then there are not actual harmful affects to your credit, only positive ones.
It will depend on your financial situation as to what debt consolidation service interests you. Those who are planning on applying for mortgage loan or are attempting to remove high interest rates from credit card debt a debt consolidation loan is an excellent option. Other types of debt consolidation services or programs can leave negative marks on your credit report and will decrease your credit score.
The debt consolidation loan will leave no negative effect on your credit report and possibly will increase your credit score. Because you are paying 100% of your debt the debt consolidation loan will allow you and your creditors to remain friendly. The accounts you are paying off in full can be closed or remain open for credit history length preservation. It is a good idea to leave a couple of the older accounts open as to not affect your credit score.
Susan Reynolds is a content coordinator for a leading South African Debt Consolidation provider. For more information visit: http://www.debtconsolidation123.co.za/