What are 4 things debt consolidation can do?

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asked Apr 16, 2023 in Law & Legal by Glueonhands (4,510 points)
What are 4 things debt consolidation can do?

2 Answers

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answered Apr 16, 2023 by RCallahan (13,630 points)
The 4 things that debt consolidation can do are.

Allow you to pay off your debt faster.
Improve your credit score.
Lower your interest rates.
Turn multiple payments into one single payment.

A debt consolidation company charges between 15 percent to 25 percent of the debt being settled or consolidated.

In most cases it's a good idea to get a debt consolidation plan, especially if you have several high interest loans.

However debt consolidation can also be a bad idea.

If you have a debt consolidation loan that is a secured loan, you could lose the asset this is secured against (typically your home or car) if you don't keep up the repayments on your loan.

It's better to consolidate debt instead of settling the debt as debt settlement is riskier by only paying part of the principal.

The debt consolidation is a safer and less riskier way of reducing your interest rate while also paying off your complete principal balance.

Debt consolidation stays on your record for at least 7 years.

A debt settlement will cause your credit score to drop—perhaps by more than 100 points—and the damage could last for a while.

You can get denied for debt consolidation when you don't have a high enough income to keep up with the payments of the debt consolidation loan or if you don't have a good enough credit score that meets the debt consolidation loan companies requirements

Another reason you can get denied for debt consolidation is if you don't meet or satisfy the basic requirements like being at least 18 years old or older and having a bank account.

Debt consolidation loans for bad credit are hard to come by.

Lenders like to see a credit score of at least 670 for a debt consolidation loan, but probably closer to 700 just to be safe.

The amount that debt consolidation costs varies depending on how much debt the debt consolidating company is settling for you..

Debt consolidation companies typically charge between 15% ti 25% of the debt they are settling

Most people enrolled in debt settlement ended up paying about 50% of what they initially owed on their debt, but they also paid fees that cut into their savings.

When you consolidate debt, the repayment timeline starts from day one and may extend as long as seven years.

To consolidate federal student loans, you first must fill out the Federal Direct Consolidation Loan Application and Promissory Note, which should take about 30 minutes to complete.

From there, as mentioned above, the process of consolidation generally will take anywhere from 30 to 45 business days.

You can use a personal loan to consolidate your debt.

A personal loan can be a great solution to consolidating debt.

Taking out a single personal loan to pay off existing debt or credit cards can simplify your finances and save you money in the long run by reducing your interest rates and fees.

The types of loans that can be used for debt consolidation are unsecured personal loans, secured personal loans and home equity loans.

You can also use other methods to consolidate debt, such as a balance transfer credit card or a home equity line of credit.

Debt consolidation can affect your tax liability.

Debt settlement will appear on your credit report as such and hurt your credit score.

Also, you may have to pay taxes on the difference between what you paid and what you owed.

Yes, the amount of debt you didn't pay is generally reported to the IRS as income.

When you do a debt settlement, the amount of your debt that's written off is generally reported to the IRS.

And it's generally considered taxable income.

If you do a debt settlement this year, you may end up owing the IRS money next year when you file your next years tax return.

Debt Consolidation can help with Tax Debt.

A Debt Consolidation plan can enable you to pay your tax debt back in fixed monthly installments, rather than all at once.

And depending on the size of your balance, you can stretch out the repayment period up to six years.

To qualify for an IRS Tax Forgiveness Program, you first have to owe the IRS at least $10,000.00 in back taxes.

Then you have to prove to the IRS that you don't have the means to pay back the money in a reasonable amount of time.

Back tax consolidation involves taking out a loan that covers all your outstanding back taxes, paying them off, and then repaying that loan in the form of a single monthly payment.

You can consolidate just about any back taxes with this process, including most tax back taxes owed to the IRS.
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answered Sep 15, 2023 by Amtrak34 (1,720 points)

Consider consolidating them for a breath of fresh air! With a lower interest rate loan, you could simplify your financial life. But, it's essential to be aware of all the terms and potential fees. I've found choice financial reviews to be trustworthy in the past, and I recommend going through their reviews to gauge their efficacy for your needs.

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