Debt Consolidation
What is debt consolidation ?
In debt consolidation, all your unsecured debts are added up and then you will be given a single monthly payment. The person handling the debt consolidation will take your payment and divide it among your creditors.This is the most basic explanation. Typically what happens is that a lender gives you a new loan that pays off all of your old loans and then you make one monthly payment to your new lender. This new loan carries interest, so you will end up paying the total balance of your previous debts plus interest.
What is wrong with that? In a debt consolidation, when your debts are added up, all the inflated high interest and penalties will be added in, too. That makes your total debt higher than it should be-and it will take more money and time to pay it off. In addition, your credit score will still suffer from late payments and your credit card company will still cancel the credit cards you consolidate.
What to look for in debt consolidation
Be wary: Some debt consolidation companies are not lenders. They do not give you a new loan that covers your old debts – they just collect a monthly payment from you, disburse some to your creditors, and keep some for themselves. These programs can send you into default and hurt your credit. Make sure to only go to an accredited lending institution for debt consolidation.
The only time McCarthy Law PLC would recommend debt consolidation is if an individual or business carries debt with extremely high interest rates, and they can get a loan from an accredited lender with a much lower interest rate and manageable monthly payment. This is a great situation to do debt consolidation.
Otherwise, consumers and small business owners should consider debt settlement. This is where an attorney negotiates for substantial reductions in your debt. You pay less than debt consolidation and over a shorter amount of time – even after attorney’s fees – and you are represented by an attorney.
In an attorney debt settlement program, your attorney will negotiate the pay-off amount with each creditor. In those negotiations, the focus is on the principal – the money you actually charged on your credit cards. We negotiate to remove high interest rates, the compounded interest that has built up over time and the late fees and over-limit fees.
Learn more about debt consolidation and debt settlement in one of our debt settlement offices nationwide. There is no pressure at McCarthy Law. We will take the time to explain your options so that you can make the right choice for you and your family. Our attorneys will recommend what is in your best interest based on your specific circumstances. Give us a call today at (855)-976-5777 or contact us now for your free debt consultation.