How Do Those Credit Consolidators Work?
If you have a high level of stress because you are heavily in debt from credit cards and feel there is no solution, consider using a credit consolidator. Understand how they work and fully investigate whether a consolidator can help you.
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Benefits
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Consolidators can help you pay off old debt. Instead of paying multiple companies to which you are in debt, you pay only one organization that, in turn, pays your creditors. Consolidators also have experience in negotiating with creditors to get the best deal for you. Since consolidators are working with creditors on your behalf, you are less likely to get calls asking when you will pay them.
Assessment
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When you first meet with a consolidator, he will assess your situation to determine if and how the company can help you. Bring copies of your credit card bills, other outstanding bills and your credit report with you to the meeting. If you have a budget, bring that with you. If you don't have a budget, the consolidator will help you develop one. This initial meeting is an opportunity for you to have your questions answered and to understand the process.
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Account Preparation
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Call all of your credit card companies and inform them that you want to close all of your accounts. This will enable you to capture a final snapshot of your financial situation to share with the consolidator. It will also insure your creditors that you are not going to add additional debt to your cards.
Negotiation and Agreement
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The consolidator will negotiate with creditors to reduce or eliminate interest and late fee charges. The company will also attempt to reduce the principal amount of your debt. The consolidator cannot negotiate outstanding tax bills, car payments and money owed on secured loans such as your mortgage.
Payments
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Based on negotiated amounts, you pay the consolidator a monthly amount, which the company divides up and pays creditors. The consolidator charges you a monthly charge for processing the deal he has negotiated for you.
Warnings
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Investigate more than one consolidator. Find out how long the consolidator has been in business. Contact your state attorney general's office and the Better Business Bureau to find out if there are any complaints against the consolidator. Some companies posing as consolidators commit fraud -- for example, not paying any of your creditors and keeping all of the money you pay them.
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