What Type Of Debts Qualify For A
Debt Consolidation Solutions Program?
The general rule of thumb is that only
unsecured debt can be included in a Debt Consolidation Solutions
program. By definition, unsecured debt is any debt that is not tied
to a major collateral. In other words, anything that can be repossessed
(Car, Home, Boat, ect.) would not qualify for any debt consolidation
program.
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Type of debts that are Acceptable
for Debt Consolidation:
All Credit Cards
(Regular, Store Cards, Gasoline Cards) Credit card debt is the
most popular type of debt accepted in Debt Consolidation
Any Unsecured (Signature)
Loans These are primarily personal loans also referred to as
signature loans. There is no collateral securing this type of loan.
In some cases the lender may have the applicant submit a list of
household goods in order to receive such a loan. This is just a
scare tactic lenders use to make the applicant think that they will
come an repossess their furniture, appliances, ect. if they
default. That will not happen! This is not a secured loan
and can be included.
What About a Personal
Loan from a Friend or Relative? That can be included, but it
will be up to the person who lent the money to accept or decline the
proposal from the consolidation agency. With traditional lenders, a
reputable consolidation company has agreements in place. They
should know based on the consumers situation, if a creditor will accept
their proposal as opposed to a friend or relative that loaned them
the money and can either accept or decline. It is recommended that
the consumer consults the friend of family member before submitting
to debt consolidation agency.
Student Loans
Most government student loans are very low interest. Unfortunately the
government does not negotiate. They will accept a student loan
into a consolidation program, but the payment and interest will
remain the same. So why include a student loan? For most
consumers it's the convenience of one monthly payment for all
creditors that attracts them to a consolidation program. So the
advice is to go ahead and include all student loans. But if most of the
consumers debt consists of only school loans, there are special
programs to consolidate student loans.
Closed Utility Bills
Consumers may include any utility bill (gas, electric, phone, cable
ect.) only if the account is closed and they are not using the
service of that utility company. Usually these type of accounts are
from previous residences.
Collection Accounts
Any account that is in collections can be consolidated. There is usually
no exception to the rule.
All Repossession Accounts
If a consumer owes a balance on any account that was defaulted on and
the collateral (car, property, boat, ect.) was repossessed, the
collateral no longer exists and the debt can be consolidated.
Medical Bills All
medical bills can be consolidated.
Any Other Unsecured Debt
With No Collateral If you are unsure if a certain debt
qualifies, ask your consultant or contact us with the
question.
There are a few other things
consumers should be aware of when applying for debt consolidation.
Unlike bankruptcy, consumers may choose the accounts that they want to
consolidate and the accounts that they want to keep out of the program.
In other words, you don't have to consolidate every debt you
have.
The reason it's important to know
this is because the creditors require that all revolving accounts (like
credits cards) to be closed when accepted into a debt consolidation program.
This only makes sense since the goal of Debt Consolidation is to
eliminate debt, and the first step in achieving this goal is to stop
charging.
A few things to know about American
Express, Credit Unions and Checking Accounts:
American Express If
a consumer has an American Express credit card, it's advised to include
it in a consolidation program. The reason is that American Express
is the only creditor that conducts regular credit checks on all
their clients. If an account is excluded, American Express will
eventually find out that the consumer in a consolidation program
and take away their charging privileges. On the other hand, if a
consumer completes the program without late payments, American
Express will eliminate their interest.
Credit Unions If
a consumer has a loan or credit card with any Credit Union, they may
want to consider keeping them out of Debt Consolidation. Most
Credit Unions are a privilege and carry a much lower interest rate
than other creditors. Many consumers that use Credit Unions have
additional accounts with them such as Insurance Policies or
Checking Accounts. If they consolidate a credit card or loan from a
Credit Union, they may lose all other accounts or policies
associated with that lender.
Checking Accounts
If a consumer has a credit card and checking account with one bank,
their credit card may be used as overdraft protection for the
checking account. In a case as such, they should close out the
checking account and reopen with a different bank. Otherwise when
the credit card is accepted into a consolidation program, they may
loose the checking account.
Type of debts that are Not
Acceptable for Debt Consolidation:
Garnishments Usually
associated with child support, this is when the employer garnishes a
part of the wage as ordered by the Courts.
Child Support No
one can change the outcome of a Court Order.
All Judgments and Court
Orders
Payday Loans or Advances
(unless in collections
Rent To Own Usually
pertains to furniture and appliances that are rented with the option
of owning.
Time Shares Just
like any real estate, this is a secured debt.
Current (Open) Utility
and Phone Bills Consumers
may only include utility bills (gas, electric, phone, cable ect.)
if that account is closed and they are no longer using the service of
that utility company.
Any Type of Tax or IRS
Debt
Traffic Fines Court
ordered, no exceptions.
Business Accounts
Consumers may not include any account that solely a business (not
the individual) is responsible for.
Any Secured Debt Tied To
A Major Collateral In other
words, anything that can be repossessed (Car, Home, Boat, ect.)
would not qualify for any debt consolidation program.
If you are unsure if a certain debt
qualifies, you may ask your consultant or contact us with the question.
Some Do's and
Don'ts
Do make sure that you close all
revolving charge accounts yourself when entering into a consolidation
program. See for more details.
Do not charge up your credit
cards before applying for debt consolidation.
Do not make balance transfers
before applying for debt consolidation.
A note from the author;
These Debt Consolidation laws are
created and governed by the creditors. Only the creditors may change them.
If a Debt Consolidation agency ever tries to convince a consumer of
anything other than what is outlined in this report, they are not the type
of agency that a consumer should get involved with. Detailed information about
choosing the right agency to consolidate debt can be found here. Victoria Egnatova Senior Financial Consultant
Other
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Consolidate Debt The Federal Reserve US says consumer
debt has risen to a staggering $876.2 billion. How can Debt Consolidation help
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