Debt Consolidation: Reduce Payments & Save Money
Have Credit Card Debt, Collection Accounts, Payday Loans, or Medical Bills? Get a personalized solution to manage your debt and achieve financial freedom.
Explore Your Debt Consolidation Options
Get your free, no-obligation consultation.
Here are Just a Few of the Major Credit Card Companies Money Fit Works With for Consolidating Debt:
The Money Fit debt management program isn’t a new loan substituting your existing debts. We’re your ally, actively negotiating with your credit card companies to alleviate your financial burden.
¿Prefieres leer en español? Visita nuestra página de Consolidación de Deudas en español.
How To Save Money with Debt Consolidation
Debt Consolidation works by taking all of the unsecured debt an individual owes and combining it into one monthly payment. The type of debt consolidation plan used determines whether the accounts are paid in full through a loan, or if the creditors owed are paid monthly through one payment source.
Money Fit offers debt consolidation without a loan, meaning that we work with your unsecured debt, contact your creditors to achieve the best interest rates and reduced payment amounts available, then consolidate all of your debt into one lower monthly payment.
Our Debt Consolidation programs may help:
-
Lower your payments by up to 50% or more
-
Put an end to collection efforts
-
Drastically reduce interest rates
-
Stop late and over-limit fees
You can enter your information to be contacted by one of our highly skilled counselors, or call us for quicker assistance.
Continue reading for more information about debt consolidation and how you may benefit from it.
The Different Types of Debt Consolidation
Instead of relying on a loan, that can carry various potential financial risks that we will describe later, this form of debt consolidation combines your unsecured debt into one monthly payment. Consumer Credit Counseling agencies have offered this nonprofit service for decades.
What Are Your Debt Consolidation Options? Let’s Review:
Debt consolidation can be a powerful tool to simplify your finances and potentially save money on interest. It combines multiple debts, like credit cards or medical bills, into one payment with (ideally) a lower interest rate. This streamlined approach can make managing your debt less overwhelming and potentially help you pay it off faster.
There are two main ways to consolidate debt:
Debt Management Plans (DMPs) with Non-Profit Credit Counseling Agencies:
-
-
How it Works: You enroll in a program with a certified credit counselor who reviews your financial situation and creates a personalized budget. The nonprofit organization will contact your creditors on your behalf to lower your interest rates, late fees, and potentially even your total debt amount. You then make a single monthly payment to the credit counseling agency, which distributes the funds to your creditors according to the agreement. This is a good option for those who are disciplined with their finances but overwhelmed by multiple debt payments and high-interest rates.
-
Pros: Potentially lower interest rates, reduced fees, streamlined payments, expert guidance from a credit counselor.
-
Cons: It typically requires commitment for 3-5 years to complete the program. You will likely need to close your credit card accounts to avoid adding more debt while enrolled. While there may be fees associated with setting up the program, the fees are typically drastically lower than debt consolidation loan fees, or settlement fees.
-
Debt Consolidation Loans:
-
How it Works: You take out a new loan with (hopefully) a lower interest rate than your existing debts. You use the loan proceeds to pay off your existing creditors, leaving you with just one monthly payment to the lender.
-
Pros: Potentially lower interest rate, simplified payments, may be a faster way to pay off debt (depending on the loan terms).
-
Cons: You’ll need good credit to qualify for a favorable interest rate. There may be loan origination fees and other charges, which in some cases can be quite expensive. If you’re not disciplined, it’s tempting to use your old credit cards again and rack up even more debt.
Which debt consolidation option is the right for you?
Deciding whether a Debt Consolidation Plan with a nonprofit organization such as Money Fit or a debt consolidation loan is best for you depends on several factors:
Your Credit Score: Debt consolidation loans generally require good credit to qualify for a favorable interest rate. If your credit score is lower, a DMP may be more accessible, as credit counselors can negotiate with creditors on your behalf.
Your Debt Amount & Type: DMPs are designed to help with unsecured debts like credit cards and medical bills. If you have secured debts (like a mortgage or car loan), a debt consolidation loan may be a better fit (with careful consideration of the risks of using your home, etc., as collateral).
Your Financial Habits: If you’re disciplined with budgeting and committed to not using your credit cards while in debt consolidation, a DMP can be a great solution. If you’re tempted to rack up new debt, then a loan (where your accounts are closed) may ensure better success.
Your Goals: A DMP prioritizes long-term financial health, offering budgeting support and helping you rebuild credit. A loan can potentially offer faster debt payoff but requires careful management to avoid building new debt during repayment.
Get personalized guidance:
The best way to determine the right debt consolidation path for you is to speak with a certified credit counselor. They’ll be able to:
- Analyze your financial situation in detail.
- Explain the pros and cons of each option clearly.
- Potentially suggest solutions other than debt consolidation, such as creating a repayment plan that works with your budget.
Remember: Debt consolidation tools can be powerful, but they work best when you’re informed. Taking an active role and seeking expert advice will put you on the path to financial freedom.
National Debt Consolidation Program available in the following states:
Frequently asked questions:
The following questions are the most common questions we are asked about regarding Debt Consolidation.
Both types of debt consolidation may have an impact on your credit score, especially early on. Though, typically, a debt consolidation loan can have less impact if an individual doesn’t use their credit cards and accumulate more debt.
A debt consolidation program without a loan can have an impact early on due to accounts being closed to further charging. This is typically a brief impact due to the account balances going down instead of either staying the same or increasing. Balance ratios play a large role in the credit score formula.
Typical debt consolidation payment terms last between 3 to 5 years. Repayment time varies and there are several methods that are commonly used to expedite the process.
Debt consolidation can be a safe alternative in comparison to other courses of action. It can be far less damaging to an individual’s credit, and less risky overall, than repayment through debt settlement or bankruptcy.
One of the biggest risks of debt consolidation comes from the potential for mismanagement by the consumer who charges up original debt or opens new lines of credit and adds to their overall financial burden. Ultimately, Do-It-Yourself consolidation or debt repayment is typically preferred but it isn’t always practical.
The costs of debt consolidation can vary drastically. Programs that don’t rely upon a loan will range from approximately $50.00 to $100.00 for enrollment fees and an average of $25 to $50 dollars for a monthly fee. With a loan, it depends upon the interest rate and monthly payment required to satisfy the loan terms.
One of the biggest disadvantages comes from the closure of unsecured accounts when utilizing programs that don’t rely upon a loan and the fees that are charged. While the fees often less than that of a debt consolidation loan, that isn’t always the case.
As for debt consolidation with a loan, the disadvantages can be the costs, repayment terms, and the potential for adding to your debt load rather than reducing and eliminating it.
Debt Consolidation Blog Posts
Find important answers, advice, and analysis to a wide range of personal finance topics in our Money Motivations blog.
