Consolidating credit debt

When the balance has reached a sufficient level, NDR negotiates with your individual creditors in an attempt to get them to accept less than what is owed. Expect your credit score to drop 75-125 points as your bills go unpaid and accounts become delinquent.If a settlement is reached, the debt is paid from the escrow account. In Charge (nonprofit debt consolidation), Avant (debt consolidation loan) and National Debt Relief (debt settlement) each represent different segments of the debt consolidation industry.The traditional form of credit consolidation is to take out one large loan and use it to pay off several credit card debts.Because you now only have one loan, a debt consolidation loan, you have one monthly payment, which simplifies the bill-paying process. Lenders rely heavily on your credit score as a signal that you will repay the loan.Debt consolidation works when the interest rate and monthly payment on your credit card debt is reduced by combining all your bills into a single payment.Another way to consolidate high-interest debt is to have an agency negotiate a settlement with the card companies for less than what is owed.

HOW IT WORKS: A credit counselor asks questions about your income and expenses to see if you qualify for a debt management program.If you enroll in the program, you agree to have In Charge debit a monthly payment, which will then be distributed to your creditors in agreed upon amounts.In return, credit card companies agree to lower interest rates to around 8% (sometimes lower), which results in lower monthly payments.There will be a drop initially due to closing all but one of your credit card accounts. HOW IT WORKS: First, you must fill out an application and be approved for a loan.Your income and expenses are part of the decision, but credit score is usually the deciding factor.

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We’ll explain the advantages and disadvantages of each to help you distinguish between the three types of debt consolidation programs, as well as how to get started.

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