How to Use a Debt Consolidation Company
If you've found yourself with a large amount of debt, you're probably looking for companies that can help you reduce it and improve your credit. One solution is to use a debt consolidation company. Debt consolidation companies ask you to give them all of your creditor information, including names and amounts owed to each. They will then in turn negotiate a potentially lower APR and freeze the accounts. You will make one payment to the consolidation agency and they in turn will pay off the creditors, after taking a fee for their services. Although using the services of a debt consolidation company can be helpful, you need to thoroughly research the company that you decide to use to ensure its reliability.
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Instructions
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Locate a debt consolidation company by using online review sites to narrow down your choices. For example, you can search for consumer reviews and ratings on ePinions (see Resources).
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Set up an initial consultation with the debt consolidation company. Arrange for a phone consultation or an in-person interview. Bring all of the relevant information regarding your debts, including creditor names, APRs and balance. The company will weigh your information to determine the amount you will need to pay each month and how many months it will take to eliminate your debt.
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Find out the interest rate that the debt consolidation company charges. When you use a debt consolidation company, they will provide you with an APR. Make sure that this number is lower than the current rates you are paying. You can discuss payment terms during the initial consultation, prior to signing up for their services.
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Review all of the contracts that you sign with a debt consolidation company. These contracts will include the APR, balance, payment terms and length of the agreement.
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Pay one fee to the debt consolidation company. You will mail a single check to the company that will be then distributed to the creditors to whom you owe money. The figure you need to pay will be negotiated prior to starting the payment plan.
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Tips & Warnings
Don't expect to be able to continue to use your credit cards once you sign up with a debt consolidation company. The creditors will freeze the accounts to allow you to pay them off.
