Credit solutions
Credit solutions involve debt consolidation companies whose purpose is to collect the debt you owe a bank or an institution, and facilitates the process for the borrower by use of their third party services.
Credit solutions and debt consolidation companies work by contacting the lender on your behalf, after the borrower has contacted them, and would like to consolidate a loan or a debt. The borrower gives a detailed anlysis of their income and expenditure, and the credit solutions company uses this information to draw up a payment plan. Th credit solutions or debt consolidation company thenm contacts the lender and propose terms of payment based on their income and monthly expenditure.
Once these details have been obtained, they approach the lender with a proposed payment every cycle, usually every month, the lender usually does not ignore requests from credit solutions agencies, as at the end of the day, it means they will be getting back their loan, plus any substaintial interest the loan has accumulated over the years.
However for the borrower during this process of consolidating their debts, their credit rating and score is temporarily halted, which is normal, as when they do clear the debt their credit rating and score goes back to an even better position than it was prior to the debt.
It also should be noted that many banks and building societies, will be reluctant to offer extra credit especially if the borrower is undergoing debt consolidation, which does make sense, as you wouldn’t want to be tempted to get into the same scenario with extra credit that necessitated the use of a debt consolidation firm.
The aim of a credit solution company is to reduce the amount of the debt, and the frequency of the regular payments on that debt, although it might take a lot longer than if the debt had been handled conventionally.
Some debts don’t require the use of a credit solutions firm or debt consolidation company as the interest rate is so low it wouldn’t serve any beneficial purpose to consolidate such a debt, such as student loans which are mandated by the government to have low interest rates, since credit solutions or debt consolidation firms could typically add a further 20-30% on the existing debt, it would not be financially wise to prolong a low interest debt at a higher interest rate if you could pay it off at the current rate and save yourself a bundle.
Visit Debt consolidation for some great consumer credit counseling services, and dealing with credit card debts in general.
Filed under: credit cards for bad credit