Consolidating debt hurt your credit

The agency should be organized, send payments and statements on time and offer strong consumer education and support. The payment is usually around 2.5 percent of the total debt, though in hardship situations, there is some wiggle room. Why consolidate bills if you can't pay for basic expenses or if there are better alternatives?

You can stop the plan at any time, and you can also pay more -- and get out of debt faster -- when you have extra funds. You wouldn't, which is the reason consolidation begins with a counseling appointment where your entire financial situation is assessed.

This is usually people’s preferred option since mortgage interest rates are usually much lower than other loan interest rates, and mortgages can be amortized (paid) over 25 years.

This means you can arrange much lower monthly payments than with another type of loan.

With a debt management plan, you make one payment to the credit counseling agency, which distributes the money to your creditors until they are paid in full.

Even if they are members of such organizations, though, be picky. So while the agencies and employees vary, the plans are all structured the same way: Your counselor determines how much it will take to pay your creditors in full in three to five years.

Consolidation is not right for everyone, make a decision that's right for you. Your payments will remain the same until all the creditors are paid off. You must keep up with your monthly statements and forward them to the consolidation agency. You can't use your credit card until you're done with the debt management plan. A debt management plan is not bankruptcy, but it will appear negatively on your credit report. Here's what you need to know about consolidating accounts through a debt management plan with an agency. Instead, they have preset arrangements with most financial institutions, many of which lower interest rates and fees, so more of your payment goes toward the balance rather than finance charges. With something as precious as your finances, be exceedingly careful about who you work with.

Car insurance providers consider your credit score when setting your insurance rate.

Your credit score is one of the most important factors of your financial life.

Banks use it to decide whether to give you a credit card or loan.

Consumer credit counseling agencies act as an intermediary between you and your creditors in order to establish a set monthly payment plan that your creditors agree to accept, and that you can afford.

The method used to get your payments lower than what you may be paying today is simple enough to explain; your banks agree to lower your interest rates, and consolidate all of your payments into a single payment.