Our debt consolidation plan is designed to provide a unique solution to your personal financial situation. We will provide you with options to help you plan for a debt free future.
Debt consolidation can help you with your unsecured debt (debt not linked to an asset).
Through a debt consolidation plan you will be able to combine most, if not all of your unsecured debt and make one single monthly payment. Those accounts will still exist, but will be paid monthly through your account at ACCC.You will find that by engaging in a debt consolidation program you will become more organized and accurately understand your financial obligations each month. Debt consolidation may also lower your monthly payments.
Examples of unsecured debt include: credit cards, department store cards, credit lines, and unsecured personal loans are all examples of unsecured debt. Each month, we disburse payments to your creditors on your behalf.
Upon enrolling into a debt management plan we will create a proposal to your creditors for a possible reduction in interest rates, perhaps re-aging your accounts and making them current, or removing penalties. Your debt manageemnt plan also may include a reduction in finance charges and over limit fees. And lastly, your plan may lower your monthly payments and the time required to pay off your debt.
Our professional credit counselors are available weekdays, evenings and weekends. Call to speak with a certified counselor to help you determine if a debt consolidation program is right for you, and to help you with a free budget analysis. Or begin the process with our
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A debt consolidation plan is designed to provide a unique solution to your specific financial situation. We will provide you with options to help you plan for a debt free future.
Debt consolidation can help you with your unsecured debt (debt not linked to an asset).
Examples of unsecured debt include: credit cards, department store cards, credit lines, and unsecured personal loans are all examples of unsecured debt. In debt consolidation, we also disburse payments to your creditors on your behalf.
Through a debt consolidation plan you will be able to combine all of your unsecured debt and make one single monthly payment. You will find that by engaging in a debt consolidation program you will become more organized and accurately understand your financial obligations each month. Debt consolidation can also lower your monthly payments.
By enrolling into a debt consolidation plan we will work with your creditors for a possible reduction in interest rates. Debt consolidation also includes a reduction in finance charges and over limit fees. And lastly, debt consolidation will lower your monthly payments and your pay off time.
Professional debt consolidation counselors are available weekdays, evenings and weekends. Call to speak with a certified counselor to help you determine if a debt consolidation program is right for you. Or you may contact us through our website.
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Things You Should Know About Student Loan Debt Consolidation
The average American by the time he graduates or becomes a professional, and in the worst case scenario even if he doesn't graduate, accumulates a certain level of student loan debt. Whether they are federal loans or private student loans, the higher the educational achievement is the higher the level of student loan debt usually becomes.That is the price students have to pay to make their dreams come true - to become a doctor, a nurse, a lawyer, or a Wall Street hotshot, student loan debt consolidation have been a major resource for so many years students spend in school.
Usually, students have to pay off these multiple student loans the minute they finish school. Some however, have opted to pay for accrual of interest even when in school, and some have opted to defer payments until they get out of school.No matter what the choice is, by the time an average American student finishes school, he is saddled with student loan debt.
Not paying these student loans is not an option - defaulting on a federal student loan will get the government on your case with your salary and will not do any good to your credit report. As a rising hotshot, the last thing you need is to start off with a bad credit. If you are having difficulties making payments on your student loans, it might be the time to consider a student loan debt consolidation.Before making that decision, there are several things you need to consider.
When you consolidate, you actually have to consider some advantages and disadvantages. A student loan debt consolidation can significantly reduce your monthly payments because the debt is stretched out over longer payment terms. It would seem like you are making some savings from your monthly budget because of the additional money cut out from the required monthly payment.Consolidation would also prevent you from defaulting on your student loans and ruining your credit.
With monthly payments, it becomes easier for you to manage your credit and you get to save your credit report. But there is also the bad side to consolidating student loans, and knowing all these facts would help you make the wiser choice.When you consolidate your student loan debts, always remember that many lenders actually offer a deferment plan to their borrowers in times of financial hardship.
Federal student loans offer forbearance during financial difficulties. But if it is still not enough to get you back on your feet, then forbearance or deferment of payment may not help. Another thing to consider is the fact that once you apply for consolidation, you will get stuck with the interest rate you sign up with and you lose out on any borrower benefits provided by your lender.Before opting for a student loan debt consolidation, carefully consider your options. Seeking financial advice from experienced credit counselors can be very helpful. Being honest to yourself would make the choice easier. Lastly, always opt for a plan that suits your financial situation.
Quick Tips On Debt Consolidation
by Melissa Kellett
Debt consolidation is not such a complicated process and it can provide many advantages to those who are buried deep in debt due to excessive spending or unexpected circumstances. Here are some tips to understand debt consolidation and make the most out of it.Debt consolidation is ideal for getting rid of that expensive credit card debt that can cost you up to 20% in terms on interests for financing unpaid balances. Credit card debt is probably the most expensive kind of debt only comparable to payday loans and cash advance loans. Thus, using debt consolidation to eliminate it is a smart thing to do.
Interest Rate And Collateral
The interest rate charged for debt consolidation loans tends to be lower than the rate charged for many other financial products, especially credit cards and pay day loans. However, this is due to the fact that most consolidation loans are secured loans. The collateral used to guarantee the loan is the equity left on your home. Consolidation loans are thus, home equity loans or second mortgages. There are unsecured consolidation loans as well but these loans charge a significantly higher interest rate and due to the unsecured nature they are harder to qualify for. Thus, they are not so convenient for those buried in debt and are only suitable for those with small credit card debts that they want to consolidate to bring some ease to their income.
Debt To ConsolidateNot all debt is suitable for consolidation and this fact has to be taken into account when considering debt consolidation programs. If you want to consolidate your debt you need first to know the nature of your debt. Credit card debt is perfect for consolidation but subsidized student loans are not. Basically, high interest rate debt is suitable for debt consolidation as long as there are no pre-payment penalty fees associated with it. And subsidized loans or loans with low interest rates such as federal student loans, government loan for first time home buyers, mortgage loans or home equity loans can be consolidated but nothing good can be obtained out of it.
Reducing The Monthly Payments And Saving Money
By consolidating your debt you can reduce the amount of money you pay each month in terms of debt repayments and you can save money. These two things can sometimes be done simultaneously and then, debt consolidation is undoubtedly to your advantage. However, it is not always possible to reduce the monthly payments and save money at the same time. By extending the repayment program you can reduce the monthly payments. However, since the interests are calculated on a yearly basis, an extra year implies adding up to the overall interests and thus extending your loan repayment schedule too much may imply that you will lose the money you where saving, in the long run.
Thus, if you want low monthly payments and saving money at the same time, you need to find equilibrium between the loan length and your ability to face the monthly payments. If your monthly payments decrease due to a lower interest rate, there is no problem, but if you reduce them by extending the loan period, you are actually spending more in the long run.
Advantages and Disadvantages of Debt Consolidation
Debt consolidation allows you to pay down the principles of your lending obligations faster, and it offers you means to salvage fair to low credit scores in preparation for a major purchase, such as a new home.
After all, when you're knee deep in debt and your credit rating is less than ideal, home mortgage lenders will charge premium interest on the money they provide for you, after debt consolidation, however, you can apply with your newly salvaged credit and thus get lower term rates. This in turn will save you tens of thousands of dollars (potentially) over the term of your mortgage in reduced interest payments alone.
Debt consolidation also will benefit you psychologically. When you're putting out multiple “debt fires,” you must juggle a slate of interest rates, terms, and potentially even threats from creditors. When you have just one or two monthly bills to pay, you can budget easier, and you avoid wasting grueling hours calculating out the consequences of different interest rates. Furthermore, debt consolidation costs may be tax deductible, see your accountant about potential implications for moving your money around.
On the con side, however, debt consolidation can pave the way for continued poor spending habits. If you dump your hard won equity into a financial initiative to pay off your bills quickly, you may end up with a longer mortgage term (reduced lifetime savings) as well as a still as yet unbalanced budget.
Sometimes, debt is a good galvanizer -- indebted individuals must learn to budget and think for the long term. Thus, if you paper over poor habits with an easy debt consolidation loan, your financial mistakes might lead to even more dire consequences in the future.
In addition, debt consolidation doesn't always work as planned. If you get involved with a small lender who goes out of business or passes your loan along to a less than scrupulous third party, you could find yourself in legal and financial deep water. In addition, a debt consolidation initiative may not always lend to you at an ideal interest rate.
For instance, if you only have a few credit cards, it may make more sense to move all or most of your debt over to your lowest rate card than to go through the whole song and dance of taking out an independent debt consolidation agreement.
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Student loan consolidation
In the United States, federal student loans are consolidated somewhat differently than in the UK, as federal student loans are guaranteed by the U.S. government.
In a federal student loan consolidation, existing loans are purchased and closed by a loan consolidation company or by the Department of Education (depending on what type of federal student loan the borrower holds). Interest rates for the consolidation are based on that year's student loan rate, which is in turn based on the 91-day Treasury bill rate at the last auction in May of each calendar year.[citation needed]
Student loan rates can fluctuate from the current low of 4.70% to a maximum of 8.25% for federal Stafford loans, 9% for PLUS loans.[citation needed] The current consolidation program allows students to consolidate once with a private lender, and reconsolidate again only with the Department of Education.[citation needed]
Upon consolidation, a fixed interest rate is set based on the then-current interest rate. Reconsolidating does not change that rate. If the student combines loans of different types and rates into one new consolidation loan, a weighted average calculation will establish the appropriate rate based on the then-current interest rates of the different loans being consolidated together.
Federal student loan consolidation is often referred to as refinancing, which is incorrect because the loan rates are not changed, merely locked in. Unlike private sector debt consolidation, student loan consolidation does not incur any fees for the borrower; private companies make money on student loan consolidation by reaping subsidies from the federal government.
Student loan consolidation can be beneficial to students' credit rating, but it's important to note that not all federal student loan consolidation companies report their loans to all credit bureaus.[citation needed]
In the UK Student Loan entitlements are guaranteed, and are recovered using a means-tested system from the students future income. Student Loans in the UK can not be included in Bankruptcy, but do not affect a persons credit rating because the repayments are recovered from the students future salary at source by the employer before any income is paid, similar to Income Tax and National Insurance contributions. Many students however, are struggling with debt well after their courses have finished
The level of personal debt in the UK has also risen astonishingly in recent years:
"Total UK personal debt at the end of February 2008 stood at £1,421bn. The growth rate increased to 8.9% for the previous 12 months which equates to an increase of £111bn. [1]
In recent years, reports in the media have raised concerns about the use of consolidation loans.[2] The worry is that many people are tempted to consolidate unsecured debt into secured debt, usually secured against their home. Although the monthly payments can often be lower, the total amount repaid is often significantly higher due to the long period of the loan. Debt consolidation sometimes only treats the symptoms of debt and does not address the root problem. In some circumstances, snowballing debt may be a better solution.
There are other alternatives to a debt consolidation loan, where unsecured debt is not "shifted" to secured debt, but is eliminated through a settlement or payment plan. Debt consolidation can be confusing for many people, so it is helpful to learn about all of your options, and sometimes with the help of an advisor.
Debt consolidation vs loans
The multiple options available to consolidate ones debts can be quite confusing, credit counseling programs, debt settlement, debt consolidation loans, bankruptcy are just a few options available today. Trying to find the best option to suit your current financial situation can be a difficult task.
Typically, debt consolidation programs are debt repayment programs. They can consolidate most types of unsecured debts from major credit cards to personal and student loans. You choose the accounts you want to enter into the program when joining. Once enrolled, the company will contact your creditors to negotiate more favorable repayment terms on your accounts and possibly reducing your interest rates and it may even eliminate late fees. You will then send that company one lump sum payment monthly which they will disperse to the creditors you enrolled on your account when joining.
Most so called debt consolidation loans are just home equity loans in disguise. They use the equity built up in your current home loan and use it to repay all of your unsecured debts. These types of loan options usually come with heavy application fees and can greatly extend the amount of time it will take you to pay off those debts. These loans also convert all of your current unsecured debts into a secured debt which is now backed by your home. If you fall behind on your payments you could risk losing your property.
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Debt consolidation entails taking out one loan to pay off many others. This is often done to secure a lower interest rate, secure a fixed interest rate or for the convenience of servicing only one loan.
Debt consolidation can simply be from a number of unsecured loans into another unsecured loan, but more often it involves a secured loan against an asset that serves as collateral, most commonly a house. In this case, a mortgage is secured against the house. The collateralization of the loan allows a lower interest rate than without it, because by collateralizing, the asset owner agrees to allow the forced sale (foreclosure) of the asset to pay back the loan. The risk to the lender is reduced so the interest rate offered is lower.
Sometimes, debt consolidation companies can discount the amount of the loan. When the debtor is in danger of bankruptcy, the debt consolidator will buy the loan at a discount. A prudent debtor can shop around for consolidators who will pass along some of the savings. Consolidation can affect the ability of the debtor to discharge debts in bankruptcy, so the decision to consolidate must be weighed carefully.
Debt consolidation is often advisable in theory when someone is paying credit card debt. Credit cards can carry a much larger interest rate than even an unsecured loan from a bank. Debtors with property such as a home or car may get a lower rate through a secured loan using their property as collateral. Then the total interest and the total cash flow paid towards the debt is lower allowing the debt to be paid off sooner, incurring less interest.
Because of the theoretical advantage that debt consolidation offers a consumer that has high interest debt balances, companies can take advantage of that benefit of refinancing to charge very high fees in the debt consolidation loan. Sometimes these fees are near the state maximum for mortgage fees. In addition, some unscrupulous companies will knowingly wait until a client has backed themselves into a corner and must refinance in order to consolidate and pay off bills that they are behind on the payments.
If the client does not refinance they may lose their house, so they are willing to pay any allowable fee to complete the debt consolidation. In some cases the situation is that the client does not have enough time to shop for another lender with lower fees and may not even be fully aware of them. This practice is known as predatory lending. Certainly many, if not most, debt consolidation transactions do not involve predatory lending.[citation needed]
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Debt Consolidation
Is consolidating debt a blessing or a curse?
For many of us, getting into debt is gradual. First, you buy a new car, or maybe just really nice Christmas presents for everyone for a change. An out of pocket expense looks a lot more expensive if you are paying cash; but if you can get by for the low, low payment of $30 a month you probably figure that´s not a big deal. You know you´re responsible and besides, you have a good job. Or maybe you need something big and the store gives you a no interest loan to cover the cost of the item. Then you get all these credit card offers in the mail and some of them are really compelling. Pretty soon you find yourself with a half dozen credit cards–each carrying a balance–plus an account at the furniture store and a department store or two. It´s manageable because you are still making the monthly payments plus some. It´s cool.
Then, inevitably, something really big needs to be replaced. Or maybe the bonus you expected is half what you planned. Or there is a medical emergency for which you have out of pocket expenses and a deductible. Suddenly, you find yourself stretching to meet your minimum monthly payments. You might get caught in the trap of borrowing from Peter to pay Paul—borrowing cash from one credit card to make the payments on another. And deep down, you know you´re in trouble.
One solution you might consider is debt consolidation. The question is: Will it really solve your financial problems?
Advantages
Making and sticking to a budget is always a challenge. A debt consolidation loan can make handling your payments more manageable. It can provide the means to develop a workable budget, so you can get control of you finances.
Owing money is hugely stressful, especially when you know you are too close to the edge to be comfortable. You´ll only owe one lender—not a dozen—and that alone can reduce the stress of meeting and paying multiple debts.
If you are carrying a variety of debts and not paying your creditors off in full every month, then you are also paying finance charges, which can run from low rates of 6% to a high of 18-21%. If you are carrying interest-free debt with a final deadline for full payment but miss the deadline, you are then liable for substantial interest changes that are retroactive to the date the loan was originated. A debt consolidation or home equity loan can significantly reduce some of the high interest rates. With the home equity loan the interest is generally tax deductible.
A debt consolidation loan may allow you to extend the term of the loan. Instead of paying the loan off in six months, a term of a year or 18 months allows you to reduce total monthly payments. Instead of struggling under a half dozen large payments, you´ll often be able to make a monthly payment that is considerably less.
And you´ll have only one payment to make. That translates into convenience. If you´ve ever forgotten to mail a bill, you´ve seen the penalties that accrue even if the payment is only a day late. A single payment reduces the risk that you´ll forget. Late payments also affect your credit rating, so avoiding them is always a Good Thing.
Disadvantages
Before you sign on the dotted line, be sure you understand yourself and how you got in this situation in the first place. The major disadvantage of a debt consolidation loan is that if you lack self-discipline or think the debt problem is resolved, you may set yourself up for major financial problems in the future.
Some people see debt consolidation as the fix, but they don´t change their spending habits. Instead of cutting up their credit cards, they give in to temptation and run them up again. Then they have the high interest rate credit cards and the debt consolidation loan. If they let it get too far out of hand, they run the risk of ruining their credit at the least and possibly ending up in bankruptcy court. In today´s database-driven world, living down a bad credit history takes years. Should you need credit, you can get it, but only at loan shark interest rates.
One of the advantages of debt consolidation can also be a disadvantage. Sometimes by extending the period of the loan, you may actually increase the total debt. By making smaller payments you may be making them much longer and that may cost you more in the long run.
If your debt consolidation loan is secured by property or other assets, then the creditor has to give permission to sell or transfer the property. It´s often smart to get a home equity loan to consolidate consumer debt, but you have to remember that any failure to repay the loan can jeopardize your home ownership. For all intents and purposes, the lender owns a portion of your assets.
Some loans may also require a co-signer. The risk to a co-signer is that if you default, they are liable. This can cause huge problems in a family, and it´s a sure way to lose friends.
Get a plan
If you choose debt consolidation as an option for getting control of your finances, make a concurrent commitment to yourself to accrue NO new debt. Make your budget, plan your expenses, then stick to the budget.
If you don´t like budgeting per se, then at least track your spending. Log every expenditure and watch where the money goes. If you start getting receipts for every double mocha cappuccino soy latté and tally them up at the end of each pay period, you may find that your coffee habit is costing you big time.
When that´s the case, look for ways to minimize costs. There are dozens of books and magazine articles that have tips and pointers for saving money. It doesn´t necessarily mean you have to start washing your used Zip-Loc baggies (though it´s not a bad idea).
When you borrow, you compromise your future earnings. You´ll be paying off goods and services consumed weeks and months ago, but will be committed to the lender to make good on your obligation. And face it—the only reason for lending money to anyone at any rate is to make money. Banks and department stores know that the odds are in their favor and over time they will make a lot more money by encouraging you to spend now, pay later.
Using a debt consolidation loan as a tool, you can take back the power over where your money goes and when, set up a savings plan, and make a plan to build a secure financial future for yourself and your family.
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