Miami, Florida Debt Consolidation
Debt consolidation involves closing out many of the existing credit accounts - whether they be credit cards, medical bills, store cards, personal loans, or others - and placing the existing credit balance with a smaller number of companies (and often only one). The creditor can be an existing account or a lender that specializes in providing funds to credit troubled individuals. Another form of debt consolidation involves using a third-party to serve as the interface with existing creditors. This agency can negotiate with existing accounts and administer the developed workout plan on behalf of the individual.
Reasons for debt consolidation include:
- Lower monthly payments. Switching to a lower cost creditor can result in significantly reduced payments. One example is to close out existing accounts (credit cards, auto loans and store cards) and take out a home equity loan. In this case charges of up to 18-21% can be cut by approximately 2/3. Additionally, the principal payback schedule can be extended which reduces payments further. Other areas of potential savings that can be addressed include late charges and overlimit fees.
- Increase leverage and flexibility. By negotiating with a single creditor as opposed to multiple ones, a customized, comprehensive payment schedule can more easily be developed. This plan can be structured to fulfill an individual's obligations yet be realistic enough so it can be met.
- Reduce administrative work. Only one monthly payment is required as opposed to sending checks to multiple parties. Decreasing vendors can make planning and paperwork less complicated.
- Minimize creditor harassment. One of the most unpleasant aspects of having outstanding debt is the communication with creditors. Frequent phone calls seeking collections can be unsettling. Debt consolidation reduces the number of parties contacting the individual.
- Improve credit condition more rapidly. Through lower payments and a customized plan with outstanding creditors, a person who consolidates credit cab erase outstanding debt in as quickly as 3-5 years as opposed to 10+ years otherwise. Also, the likelihood of entering bankruptcy is reduced, making it easier in the future to obtain credit if needed.