Is this the way that a debt consolidation company works? They reduce the amount?
Jun 26, 2009 in
Law & Ethics
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What is a good debt consolidation company that will negotiate what you owe by negotiating with the creditor, and then you owe less than before to each creditor, but you owe them for one big new loan , to them for paying your debts?
So they are getting your debts down by negotiating and then give you a consolidation loan to cover the amount owed to them now?
What is a good debt consolidation company that will negotiate what you owe by negotiating with the creditor, and then you owe less than before to each creditor, but you owe them for one big new loan , to them for paying your debts?
So they are getting your debts down by negotiating and then give you a consolidation loan to cover the amount owed to them now?
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2 comments
a_wood80 on June 26, 2009 at 7:51 pm
They don’t reduce your debt. They “loan” you the money to pay off your other debts, and then charge you interest on that. That way, you only have one interest rate and one payment to worry about.
tianjian_8 on June 27, 2009 at 2:03 am
I have dealt with debt consolidation multiple times and never has any company suggested (nor would I believe they could) that they could cut my principal. They can only reduce your interest rate by giving you a new loan at the lower rate. They can pull multiple loans into one, but again the principal amount remains unchanged. You owe less because your interest is less or the life of your loan is longer so you pay less monthly for more months. I consolidated several credit cards and my interest rates went from 23+% down to less than 10% so my monthly payments were half of what they were. Most of those companies are owned by the same group of banks and exist to ensure that you continue to pay and don’t go into default or file Chapter 7. Don’t think they are doing you any favors.