Debt Consolidation
Debt Consolidation AMS
Frequently Asked Questions
Q: What is debt consolidation?
A: Debt consolidation is your only chance to consolidate your debts without having to file for bankruptcy or taking out a debt consolidation loan. Debt Consolidation companies reformulate your payment agreement with your creditors to keep them content with timely monthly payments, yet benefiting you with lower monthly payments, a shorter payoff term, or in most cases, both. The debt consolidation group's agents do this through a series of negotiations with the creditors to reduce or eliminate the interest that accrues monthly.
Q: How does debt consolidation work?
A: Servicing centers collect and pay out to creditors more than 100 million dollars a year. They have agreements with the creditors that if you voluntarily close your account, meet the minimum monthly requirement set by the creditors and make on time monthly payments, most creditors will either eliminate or reduce the interest. By significantly reducing the interest, you will drastically cut down your pay off time from 15-20 years to 5-6 years. This will result in saving you thousands of hard earned dollars.
Q: What are unsecured debts?
A: An unsecured debt is an account or monies owed that has no tangible property or product attached to it. Examples: Credit Cards, Medical Bills, Store Cards, Installment Loans, etc.
Q: Is debt consolidation a loan?
A: No, debt consolidation is not a loan. Borrowing money to pay back borrowed money is economic suicide. You are still paying your own bills. Debt consolidation groups are hired by you to do three things:
1. They will set up and establish a new payment plan with your creditor that suspends your original terms in favor of a plan that will help you get out of debt by lowering or eliminating your original interest rates.
2. Handle all creditor and collection agency phone calls after you have joined the debt consolidation program.
3. Consolidate your bills into one monthly payment.
Q: Should I be concerned that my accounts are being serviced through a non-profit organization rather than a for-profit business?
A: There are many financial firms offering a debt consolidation program today. Many of these companies are "for-profit" businesses. All debt consolidation group clients are serviced by the National Consumer Resource Center. NCRC is a licensed and IRS sanctioned non-profit organization located in the same corporate center as the debt consolidation group. NCRC occupies over 12,000 square feet with a staff devoted solely to servicing accounts and maintaining a strong relationship with all major creditors. But what does this mean to you?
MYTH: Non-profit organizations are subsidized by the creditors and therefore portrayed as not having the client's best interest as a priority.
FACT: If a company is not being subsidized by the creditors, they must collect all operating costs from YOU the client. This results in much higher monthly service charges that can sometimes be very close to the interest they claim to be saving you.
MYTH: For-profit companies work with all major creditors.
FACT: Many creditors will not work with for-profit companies or give the same concessions to their clients. Some examples are*:
- J.C. Penneys GM Card Household Household Finance HRS Commercial Credit American General Finance Bank of America / Nations Bank Bank of Boston Beneficial Peoples Credit Card Plan Fleet GE GTE Associates Finance
- Associates National Blazer and many more...
The truth is, creditors seriously question the intentions of companies supposedly dedicated to helping people out of debt when they charge such high monthly fees. Creditors would rather see an organization applying a greater part of a client's monthly payment towards their debt instead of a for-profit business' operating account.
MYTH: For-profit businesses claim to "work for you" and negotiate your best deal.
FACT: Virtually all major creditors will not negotiate. Their concessions and policies are pre-determined and offered to approved organizations only.
MYTH: Some for-profit companies have attorneys on staff, so they must negotiate better, right?
FACT: Again, creditors have set concessions that are non negotiable for acceptance on these programs. A lawyer's involvement is irrelevant. A debt assistance or reduce interest program's success is the direct result of a strong, positive relationship between the major lenders and the debt consolidation organization. An attorney's presence raises more questions than it answers.
* Creditor protocol and policies can change without notice. This list was comprised on 9-30-99 and is subject to variance based on such.)
