I am seeing a rise in the number of firms promoting Debt Consolidation. Properly implemented, Debt Consolidation could provide a lower annual interest, lower monthly payment, improved credit scores, and possibly even some tax advantages.
By definition, Debt Consolidation is the combining of several debts into a single new loan program. Typically this loan will use a piece of real estate that has some equity as security for the new note. Interest paid on a real estate loan is usually tax deductible; of course, I must refer you to your tax adviser on this matter.
Unfortunately, I am finding that these firms introduce Debt Settlement as the vehicle to lessen the debt load, or to avoid a bankruptcy. Bankruptcy is absolutely the last resort, and there are many approaches to consider before entering into any Debt Settlement program. Believe it or not, Debt Settlement has the potential to ruin your credit for a longer period of time than a bankruptcy.
By definition, Debt Settlement is an agreement to make a single monthly payment to a firm that will distribute the funds to the creditors on the negotiated debt.
Creditors will typically take the following actions once contacted for negotiations: Open accounts will immediately be closed; the interest rate will be raised to the maximum allowed, and late fees will accrue until negotiations are concluded. Those accounts included in the program that have not yet been “Charged-Off” will be reported as late during the negotiation period until they are “Charged-Off”. Some firms buy the debt as part of the settlement agreement then accounts will be recorded with a Balance of $0, and “Paid for less than Full Balance.” Typically, the fees for this program are approximately 20% of the difference saved in the settlement, and in most cases are paid as settlement agreements are entered into with today’s programs. Credit profiles will report these accounts for 7-years past the date of the last transaction. Thereby making everything old new again, this is called re-aging the account.
Remember! A debt that is not “Charged-Off” provides no incentive for the creditor to negotiate.
Austin Credit Group has developed a way to put Credit Score Rebuilding to positive status in a shorter period of time than either Debt Settlement or Bankruptcy.
Who do you know that is suffering from having more bills at the end of the month than money? Who do you know that you want to do business with, but need to have them improve their credit profile to do so? Those folks need Austin Credit Group sooner than later! It’s time to refer them to us!