Debt Consolidation

A rather easy choice was readily available for people to turn to not so very long ago. A debt consolidation loan was the choice, and they were not particularly worried about whether they would be able to qualify for it. But the times have changed before several years within the lending industry, and consumers now find it nearly impossible to qualify for a loan of this kind to take care of their high interest credit card accounts. Lenders are now scrutinizing loan applications as never before to try to avoid approving any more risky loans, as they now find themselves on the defensive due to the sheer number of foreclosures, bankruptcies and other bad debts. The idea of trying to consolidate their debt at lower interest rates is something that many consumers have completely abandoned as so many have been turned down for these debt consolidation loans. But people actually do still have the ability to secure the benefits of debt consolidation for themselves, so this is actually just an overreaction to a difficult situation. Being qualified for a loan is no longer necessary for them though, as they can instead now go to a debt relief company that provides credit counseling to get these benefits. A debt management plan (DMP) is something they can access in credit counseling to provide them with not only the debt consolidation benefits they desire but also a number of others as well.

A lower interest rate and a consolidated monthly payment, which are the two principal benefits of debt consolidation, are both offered to consumers in a DMP. The primary differences are that the consolidated monthly payment goes to the debt relief company, and that the debts themselves are not actually combined as they would be in a debt consolidation loan. The obligation for distributing the correct payment to each of the creditors falls on the debt relief company. But there are even more debt relief rewards for the consumer. Reduced payoff schedules of just 5 years or less, having no worries about suffering credit score damage from taking part in the DMP, bringing an end to collection phone calls and a stop to over-limit and late fees are other benefits they will receive. The serious credit damage caused by both debt settlement and bankruptcy separate them from the DMP on this issue. The 7 to 10 years of credit damage that can usually be expected from bankruptcy can hamper the consumer's ability to get new employment from some companies, a factor that must be taken quite seriously in today's economy.

Mortimer Hudoba is a writer for Debt Consolidation Advice blog, which serves as a resource for the different debt solutions out there. He is also a debt relief professional, specializing in debt reduction with over 10 years experience.