If you are struggling to repay huge debts with your little earnings, it is time you consider seeking debt relief services. The services will help you get back on the track by consolidating your debts. However, before you get started, there are certain facts you should understand first. Getting into it blindly may cause you more harm than good. Here are facts on debt consolidation Sydney offers.
1. Debt consolidation agencies are different
Just like electronic can differ based on the manufacturer, debt counseling services can also be different. Therefore, you should be cautious when selecting an agency to work with. The most desirable options are the non-profit agencies that are from the National Foundation for Credit Counseling and the Financial Counseling Association of America (FCAA). The advantage of going for agencies under these two organizations is because they require their members to follow the standards set by the council on accreditation.
Also, the counselors have to pass a comprehensive certification program before they are allowed to practice. Even when hiring a firm that has been approved by either of these bodies, it still pays to be careful. Go for an agency that is organized, offers consumer educational materials and sends statements and payments in due time.
2. Debt relief will help consolidate your debts
Credit relief services function as third party payment systems. The agency will neither give you a loan nor offer you debt settlement. On the other hand, they negotiate with your lenders with the aim of reducing your interest rates and waive any fees.
At times you might be offered a debt management plan (DMP). Once you accept the DMP, you will no longer have to send payments to your debtor. On the other hand, you will send your monthly payments to the agency until your debt has been settled fully.
3. You might lose your credit cards
One important fact to note is that all lenders within your credit plan will close all your accounts. Therefore, you might have to adjust to living without credit cards until when you clear your DMP. You will also be stopped from opening any new accounts. Coming to think of it, this makes a lot of sense since there is no way you can be struggling to pay debts and still add new ones. However, you might be allowed to keep one card which has a little balance.
4. Debt consolidation is not for everybody
For one to qualify, most of the debts must be unsecured debts such as credit cards, payday loans, personal loans and departmental store cards. In case the majority of your debts are secured loans such as car loans, alimony, student loan debt, child support, back taxes and mortgages, you might not be eligible for debt consolidation services.