Debt Consolidation for Collections
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There are times when our personal finances can be tough. Major events happen in our lives that shake our household’s budget.
A job loss, a move to a new area, a death in the family, or a medical emergency can easily upset even the most financially savvy people and eat away at their savings. When you have late payments for more than 120 or 180 days, your debt goes to collections.
Americans have a few options to deal with an account in collection; debt consolidation may be a good option for you and your household to manage your debt, repay it and regain financial stability and a stable financial footing.
Debt in collection
Many people across the United States are juggling multiple debts and trying to keep up with different creditors, high-interest rates, and multiple due dates. Inevitably, some or all of their debt goes to collections whereby a debt collection agency is responsible for chasing you up so that you repay your debts.
Your creditor may sell your debt to a collections agency, which will then try to recover as much of the outstanding amount as possible.
A debt in collection has a negative impact on credit scores and stays in credit reports for seven years. It only takes 180 days for an unpaid debt to go to collection, so it’s good to handle your debts with the help of debt specialists who can advise you.
Additionally, the constant calls from the collection agency can be stressful. Most people are ill-equipped to handle financial hardship and debt collectors' calls.
While paying off the full debt can help to improve your credit over time, it's often challenging if you're already in financial hardship. This is where debt consolidation might come into the picture.
What is Debt Consolidation?
Consolidating debt combines multiple debts into a single loan. A debt consolidation loan is a balance transfer of all your existing debts into one.
You pay off existing outstanding debts with the consolidation loan. You then pay off the debt consolidation loan with one single monthly payment for the agreed repayment period.
Consolidating your debt often comes with benefits such as simpler repayment processes and better terms and conditions than a multitude of loans.
For example, debt consolidation interest rates are often lower than for other loans. When you consolidate your debt, you may thus achieve debt relief through low-interest rates, better terms of service, and a manageable repayment plan for the total amount you owe.
This makes debt consolidation a possible lifeline when you're dealing with debts in collections. By potentially offering lower interest rates and simpler repayment structures, it can help you manage your obligations more effectively and let you benefit in many ways.
Benefits of Debt Consolidation for Debt in Collection
Debt consolidation can be particularly useful if you have multiple debts in collection. By consolidating these debts into a single loan, you may be able to manage your personal finances better and incorporate your debt repayment into your monthly expenses.
Negotiate lower interest rates
Consolidation loans for bad debt often have lower interest rates than those on the original debts, which could save you money in the long run. If you choose a shorter repayment period you will pay much less in interest charges.
This makes your debt repayment lighter and more manageable. It also means you will pay less overall for your debt repayment.
Also, debt consolidation loans come with fixed interest rates, which means you know exactly how much you are going to pay during the whole repayment period.
Simplify your monthly payments
Having one loan to pay, rather than multiple ones to multiple creditors, can make it easier to pay off credit and avoid missing payments. This can help you handle your finances and keep track of your debt repayment in a streamlined fashion.
After all, it’s much easier to keep track of your debt when you have a single payment every month to remember. It simplifies things and makes it straightforward to include it in your monthly expenses.
Stop debt collector calls
Once a debt consolidation loan is used to pay off debt in collections, the collection agencies can no longer contact you about those debts. You will have peace of mind and the certainty that you are on top of your financial situation.
Repayment period according to your needs
The repayment period of your debt consolidation loan can be negotiated. If you want to repay your debt sooner, you choose a shorter period. If you want to give yourself a more comfortable repayment pace, you can extend the repayment period. In general, most debt consolidation loans can be repaid within 12 to 72 months.
Types of Debts That Can Be Consolidated
Most commonly, you may consolidate debts such as credit card debt, personal loans, student loan debt, personal debt, medical bills, and other unsecured debt with a debt consolidation loan. However, you can’t consolidate secured debt such as mortgages, home equity loans, or auto loans.
Debt Consolidation Loan for Debt in Collection with Credit9
While debt consolidation can be an effective way to manage debts in collections, it's not a one-size-fits-all solution. You must carefully consider your financial situation, accounts in collections, credit score, and the terms of the consolidation loan.
That is why you need to work with a professional credit counselor like Credit9 who can take care of your debt consolidation loan and help you recover your credit score in the best way for you.
A credit counseling agency can tell you if you are able to qualify for a debt consolidation loan, provide valuable advice, and help you make the right decision for your unique situation.
Credit9 is an online lender who has all the tools and professionals to help you with credit repair. If you wish to consolidate your debt in collections, contact us to get free information on our services. We will help you understand the pros and cons of a consolidation loan to pay off debts compared to other options, such as a debt settlement program.