Many individuals are barely able to keep their heads above water with multiple minimum payments on credit cards due every month. Late fees and non-payment penalties are extremely high and can cost men and women a great deal of money over the course of every calendar year. Debt consolidation can help individuals save money in three primary ways. First, consolidation will put an end to late payments and extraneous fees. Second, debt consolidation will allow you to negotiate with debt collectors in order to pay off your account at a discounted rate. Third, interest rates on consolidation loans are often significantly less than the combined interest rate of multiple credit cards and unsecured loans.
Also Read: Pros and Cons of Debt Consolidation Loans
No Late or Non-Payment Fees
It is common knowledge that late payments on credit cards or most other unsecured loans are outrageous. When you take out a consolidation loan, you can repay all of your various creditors off in one fell swoop and put an immediate end to the vicious cycle of late payments and subsequent late fees.
In addition, you can take out a singe consolidation loan to pay off all of your creditors instead of repeatedly applying for expensive payday loans to make your monthly payments on time. While payday loans are a valid means of making ends meet until your next pay check arrives, these costly loans can trap people in a borrowing cycle that is hard to escape once it is entered into.
One of the biggest money-saving advantages to debt consolidation is the fact that it provides the funds needed to negotiate settlements with each of your respective creditors. Lenders will often agree to settle your account for up to 60% of the original amount owed if you can produce a lump sum for immediate payment. The fact of the matter is that creditors would rather receive a fraction of the amount owed than to turn the account over to collection agencies that pay just pennies on the dollar.
You would be wise to let your consolidation company handle negotiations with your various creditors, as they can usually arrive at lower settlements than individual consumers without representation would be granted. This is due to the fact that consolidation companies repeatedly work with the same creditors on settlements and have therefore established a good rapport and reputation with these companies and their loan settlement representatives.
While debt consolidation repayment generally includes monthly interest rates that are higher than most standard bank loans, these rates are still commonly less steep than compounded interest rates on credit cards and other unsecured debt that has a history of late payments associated with the account.
Most consolidation loan companies are eager to work with clients to arrive at repayment terms that can easily fit into an individual’s monthly budget. This means that you can pay off your consolidation loan at your own pace without the fear of expensive late payments. Simply work with your consolidation counselor to work out a repayment plan that works for you.
Debt consolidation can save you a great deal of money if you take time to find a respected company to represent your case.