Does Online Debt Consolidation Work Like Any Other Debt Consolidation Program?
Contributed by Melanie Vannuys
What Exactly Is Online Debt Consolidation?
The term "online debt consolidation" may be a little misleading, but only a little. If you choose to take part in a debt consolidation program, chances are the company you choose will be able to offer you online access to your account or progress report. Thus, the phrase "online debt consolidation."
But what is debt consolidation? In a utopian world, debt consolidation combines all of your unsecured debt into one low monthly payment with a lower interest rate. Debt consolidation is NOT a loan, but it does help lower your payments, interest and perhaps most importantly, your payoff time.
If you feel that debt consolidation is right for you, your case will be assigned to a credit counselor who will contact your creditors to negotiate your interest rates and payments. Once the arrangements have been made, you will no longer pay your creditors directly, instead you will pay the debt consolidation company.
Online Or Not, How Much Money Can I Save Using Debt Consolidation And How Much Does It Cost?
Depending on the amount of your unsecured debt and how low the credit counselor is able to get your interest rates, you could end up saving thousands of dollars. But don't take that as the gospel. Each case is different. You will have to rely on the debt consolidation company to run the numbers for you.
Some debt consolidation companies operate under a non-profit umbrella. This allows them to use a large portion of the "lost interest charges" as tax write-offs. Furthermore, credit card companies subsidize all or part of most debt consolidation services. Why would they, you ask? Because they know by collecting the debt through the debt consolidation service, they will recover at least part of the debt, which beats the alternative - you filing bankruptcy and they get nothing.
