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There are a few reasons why a credit counseling/debt consolidation
service can lower monthly payments. The most common way a credit
counseling service lowers monthly payments is through negotiations
with the creditors. Typically, a credit counseling service strikes a
deal with a client’s creditors to reduce or even completely drop
their interest rates. Creditors tend to respond well to credit
counseling services, as they understand that the client is trying to
fulfill their obligations, versus filing for bankruptcy or simply
not paying bills at all. Often creditors will offer lower late fees
and longer payment terms. Creditors are often more willing to extend
beneficial terms to debt consolidation clients so that they can
avoid the expense of turning the account over to a collections firm
or the even more costly route of trying to recover money through a
bankruptcy. Usually, debt consolidation through a debt consolidation
counselor results in a positive outcome for both the creditor and
the customer who owes the money. Creditors realize that individuals
who enter into a debt consolidation program are making an effort to
repay their financial obligations.
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