Step-by-Step Process Followed by Free Debt Consolidation Companies

If you are overburdened with the numerous debts that you have incurred then it is time for you to seek the help of free debt consolidation services. These services help with not only consolidating the debts but also in securing a loan to pay them off.

As you are already in debt, the last thing you need is paying more money to get you out of those debts. Seeking the help of free debt consolidation programs works effectively in reducing the burden of debts. These programs help to reduce the burden by preparing a debt re-payment plan. All the separate loans are merged into one loan to pay them off.

The step-by-step process followed by the free debt consolidation companies is given below:

1. Evaluation of the monthly income of the borrower - The debt manager gets a copy of your monthly income certificate and based on your monthly income, he prepares a plan of action to pay off all outstanding debts.

Negotiation with the lenders - The debt manager/counselor of the free debt consolidation company negotiates with the lenders to secure a larger loan for payment of outstanding debts. Even if you have a bad credit, the loan is secured with the help of the counselor.

1. Getting the interest rate lowered - Part of the negotiations includes reducing the rate of interest of the loan, so that you do not get deeper into debt.  He also negotiates for making monthly payments of all past outstanding debts. Sometime, if the circumstances are compelling enough, the counselor manages to get the debt reduced or in very rare cases, written off.

Getting approval of low monthly payments from the creditors - A debt payment plan is prepared and sent to the creditors for approval. When they approve the plan, the monthly payments begin. These payments are generally for a period of two, three or five years. While choosing the monthly payment amount, it is essential to remember that if the payments are low and are spread over a longer period of time, then the interest rate paid is more. If the finances are not too bad, it is better to keep the duration of the payments for a short term, as this will reduce the interest to be paid.

1. Chalking out a monthly budget for you – Some free debt consolidation counselors also help in preparing a monthly budget so that you can easily make the payments on time.

More information about the organization providing the free debt consolidation services can be obtained from Better Business Bureau and National Foundation for Credit Counseling.