Debt Consolidation Process
When customers work with a debt consolidation company the process typically begins with a free consultation. The company performs a credit counseling session to evaluate debt, credit, and available income. Once a thorough investigation has been performed, eligible applicants will be enrolled in a debt management program. These companies often negotiate lower interest rates with creditors. Customers will then pay one, streamlined monthly payment. They often pay the agency and the agency pays the creditors. However, some companies offer loans rather than debt management plans. With these loans, all creditors are paid and the customer then pays off the new loan at a fixed, lower interest rate.
Pricing and Fees
A large portion of these companies are nonprofit organizations. As a result they only charge administrative fees. These often take the form of a set monthly fee. Some companies also charge set up and cancellation fees. There may also be fees for late payments. It it important to discuss all service fees before selecting a debt consolidation companies. Companies that use loans, rather than debt management plans, have an set interest rate. For the loan to be beneficial the interest should be lower than the original rate. There may also be origination, late, or cancellation fees.
Certifications and Accreditations
Top ranked debt consolidation companies employee certified credit counselors. These counselors are trained in debt management, budgeting, and credit. There are several organizations that provide certification and accreditations. Major accreditations include the Financial Counseling Association of America (FCAA), National Foundation for Credit Counseling (NFCC), Certified Personal Finance Counselor (CPFC), and National Association of Certified Credit Counselors (NACCC). These organizations regulate the training of counselors and ensure that companies adhere to high standards. The Federal Trade Commission warns against any debt relief company that requires advanced fees. Reputable companies will explain fees before customers sign up for services.