How do Debt Consolidation Services Work?

When deep in debt, it can be tempting to turn to other organizations for help. Debt consolidation services are companies that will consolidate and potentially reduce your debt for a fee. These services are not for everyone, so it is important to know what they have to offer for you.Debt consolidation services are effective because they have experience dealing with creditors. When you are in debt, it can be intimidating and time-consuming to try to work with your creditors to create the best situation, and debt consolidation services can do this for you. When you enter into an agreement with a debt consolidation service, they will get in contact with your creditor to try to reduce the overall debt payment, combine the loans into fewer payments, and change the interest rate on the payments. Once they create a plan with your creditors, you will send the payments to a loan referral company, who will then disburse the payments to your creditors.

This sounds like a good situation – the company will do the hard work for you with seemingly no bad side for you. There are two main problems – first, you might have to pay more in the long run, as you will have to pay the consolidation company. Even though you may pay less because of the company, you could have received the same benefits with some work of your own. Although many people are hesitant to do it, you can call and work with your creditors and reduce your payments. The second problem with working with a debt consolidation company is that they are doing the work for you. The best way to get out of debt is to learn what got you into debt in the first place, and learn how to fix that. If you pay a debt consolidation service to help fix your debt, then you may be taking the easy way out. There is no magic shortcut for getting out of debt or improving your credit – it just takes hard work and time. Doing it yourself will help prevent you from falling into the same problems again.

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Graham Billings

Graham Billings is a senior at the University of North Carolina at Chapel Hill with a double major in Economics and Political Science. He plans to graduate in December of 2009 and then attend law school in the fall of 2010. He is a member of the Economics Club at Carolina, which brings in speakers and hosts events in order to discuss current economic issues and help those who do not have a background in economics become more familiar with it. He is a National Merit Scholar and Dean’s List recipient. He is originally from Greensboro, North Carolina and attended the Early College at Guilford for high school, taking classes at Guilford College. In addition to economics, his academic interests include the legal and political system. He headed the only student-run, high school-level Honor Court in high school and participated in a national model Congress in San Francisco, run by Harvard students, and won awards of excellence for his work on the mock Supreme Court. Additionally, he tutors Carolina students in economics on a volunteer basis.

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