How It Works

The first step in debt consolidation is to choose a debt consolidation company that is credible. Debt Insider works with credit companies that are listed with the Better Business Bureau in your home state, so ou can research success rate for yourself. A company that has racked up a lot of complaints without being in existence very long is likely to do more harm to your financial health than good. On the other hand, a company that handles a huge volume of clients will have a certain percentage of complaints as well. While this is natural, the important point is to see whether those complaints were resolved satisfactorily or not.

After having seen the proven results of Debt Insider, a contract for a debt management plan will be drawn up giving the company the power to negotiate with creditors on your behalf, as well as obligating you to make your payments on time, and verifying that the statements your creditors send you are accurate. Debt consolidation is a two-way street, requiring involvement on the consumer's end to ensure that the credit grantor is holding up his end of the bargain.

Our contract will also depict your new reduced total monthly payment, the new payment due date, and include a breakdown of how much each individual creditor has reduced your payments and interest rates. This will be a close estimate, as often a credit billing cycle will pass during the negotiation process, causing the consumer's balances to be slightly higher than when the contract was originally printed. Therefore, it is typical for each individual creditor's payment to increase from $0 to $3 depending upon the amount of outstanding debt. If a consumer has 10 creditors, this could reflect a $30 increase in his overall monthly payment. On the other hand, some debt consolidation companies begin by quoting a $30-$50 per month inflated rate so as to avoid any need for a payment increase. These companies will either decrease the payment after three months, or will simply use those "extra" funds to pay down the consumer's highest interest rate card that much faster.

The next Debt Insider step occur after three or four months of consistent on-time payments. At this point, we review the account and request that each creditor "re-age" its client's account. This re-aging process can take up to three months, but usually a creditor will grant the request as long as no other similar requests have been made within the previous year. This means that by the sixth to eighth month of payments the consumer's credit report should list all of their accounts as "current paid on time".

Are there any other benefits or drawbacks to debt consolidation? Yes, both. Once the consumer begins making payments, most creditors will immediately eliminate all late payment and over-the-limit fees. However, all creditors will require accounts under debt consolidation to be closed, meaning the consumer will not be able to use that particular account again. Additionally, these accounts will be marked "Undergoing credit counseling" on the credit report, which could hinder the consumer's chances for obtaining additional credit within the first 12 months.