What is
a Debt
Consolidation Program?
If you find yourself in a financial crisis or are trying to prevent one
from happening, there is a way out. A Debt Consolidation
Program (DCP) will help you regain
control of your financial situation and get out of debt.
The purpose of a Debt Consolidation Program is to get you back on track
financially through regular payments and to satisfy your creditors so they will stop
contacting you.
A DCP is designed for people who can't get a loan but can pay their debt
with some assistance and intervention. A credit counseling agency can work with you and
your creditors to form a plan that will get you out of debt.
How a DCP Works
If you are falling behind on all of your
bills, concerned about how you are going to handle your living expenses and debts,
or using each paycheck to play catch up with your creditors, a Debt
Consolidation Program is a good option for you to consider.
After we work with you to complete a budget, you'll know your bottom line (the difference
between your income and expenses). If your budget shows that you can continue to pay your
living expenses but need some help paying your debts, a DCP can help.
Working with a credit counselor will help you to prioritize and allocate
your money to catch up on living expenses and work with your creditors to deal with your
debt. A Debt Consolidation Program can help you:
Get back on track with consistent payments
Keep current on your bills
Get you out of debt one month at a time
Communicate with your creditors
Work toward accomplishing your financial goals
What Kinds of Debts Qualify for a
DCP?
Many debts can be included in a Debt
Consolidation Program,
including most types of unsecured debt such as credit cards, medical bills, department
store cards, lines of credit, collection accounts and taxes. Secured debts such as your
house and car always stay in your budget because you need them to live.
Who Participates?
All major creditors participate in consolidation programs.
Banks, credit unions, other lending institutions, department store cards, hospitals,
collection agencies and state and federal governments are just a few examples.
How Do DCPs Affect Your Credit
Rating?
Enrolling in a Debt Consolidation Program will not affect your credit score unless you are
late in making your monthly payment. In fact, if you have been late in paying your
accounts in the past, enrolling in our Debt Consolidation Program can help to improve your
credit rating by reestablishing timely monthly payments to your creditors. Some creditors
may report that they are receiving payments from a third party consolidator; however, this
notation does not impact your credit
score and will be removed from your credit report upon completion of the program.
Read what the inventor of
your FICOŽ score, Fair Isaac Corporation, has to say in
the following article:""What's
Not In Your Score".
One Monthly
Payment
You make one monthly payment to the credit counseling agency, and the
agency distributes the money to your creditors. As long as you make the scheduled
payments, creditors agree to work with the agency and not contact you.
In exchange for receiving regular payments, many creditors are willing to
reduce interest rates, eliminate late fees and bring accounts current by re-aging. That
means the creditor classifies the account as being current so it is no longer considered
delinquent.
Your Job in the DCP
Your cooperation is needed for a DCP to be successful. Your job is to make
consistent payments and maintain open communication with your credit counseling agency.
While you are making payments through a DCP, you cannot use credit or get
new credit. "Credit" for the purposes of a DCP means unsecured debt such as
credit cards or retail cards. Make sure you speak with your credit counselor before
getting any type of secured loan such as an auto or a mortgage loan.
The Counselor's Job
The credit counselor's job is to discuss where you
are financially and what options you have. If a DCP is the best option for you, the agency
will take the monthly payment you send in and disburse that payment to your creditors.
They will also maintain communication with your creditors. Communicating with your credit
counseling agency will help to keep the situation consistent and in control.
The Creditors' Job
The creditors' job is to apply your payments to your accounts, follow
policies regarding credit counseling and send you regular statements. You should monitor
those statements to make sure they reflect that you are on the program and are making
payments.
How Can I Apply?
Call our office at (619) 977-5687 to
speak with a counselor or fill out an
online application. |
