Six Steps of Consolidation Program
If you’re finding it hard to manage your bills, a debt consolidation program (or bill consolidation) can work in your favor. The purpose of this program is to help you meet your monthly payments and get you out of debt.
How do debt consolidation programs work?
Consolidation programs work in a way such that you can reduce your monthly payments and have any late fees/extra charges waived off or eliminated. Given below are the 6 steps in a consolidation program.
Step 1: Go for no-obligation free debt counseling
Contact a debt relief company and attend a free counseling session with their consultant. The consultant analyzes your financial situation and completes an income and expenditure review in order to find out how much you can pay towards your monthly bills.
Step 2: Enroll yourself in a debt consolidation program
If the consultant finds that a consolidation program is the most appropriate solution for you, he will send in the required documents for you to sign. The consultant will also provide you with details on the fees required and an authority form which will allow him to talk to your creditors on your behalf.
Step 3: Consultant starts handling creditor calls
When you receive documents, the consultant contacts you in order to resolve your queries before you sign the docs. This is when you can start referring creditor calls to the consultant who speaks on your behalf.
Step 4: Consultant negotiates on your behalf
The consultant gets the details of outstanding balances on each debt account you have. This helps him to do a complete Income and Expenditure analysis. This is then sent to your creditors with the proposal for a payment plan you can afford.
The debt consultant then works with your creditors/collection agency in order to reduce your interest rates and hence monthly payments. He’ll also request creditors to freeze or reduce extra charges and late fees on your accounts so that you don’t have to pay more.
Step 5: You send in monthly payment to the company
Your monthly payment should be sent to the consolidation company which then distributes it amongst your creditors/collection agency. So, multiple bills are actually consolidated into a single monthly payment. Thus, you don’t have to worry about handling several creditors at a time.
Step 6: Your creditors receive the payment
Within a few days of receiving your payment, the company forwards it to your creditors. You are likely to receive creditor statements as a confirmation of receipt of your payment.
Generally, the consultant takes an update of your financial situation after every 6 months or so. If in case your situation changes, you should inform the consultant about it. The consultant will review your situation and then request your creditors for a different payment plan if required. He will also help you with budgeting and money management tips so that you can organize your finances effectively.
