How To Save Money With Non Profit Debt Consolidation Companies
What Is Debt Consolidation?
Debt consolidation is simply the process of combining your many smaller debts into one larger one. Whilst you may think this would mean you would pay more for your debt in reality the opposite is true because you actually end up paying less. This is because you benefit from economies of scale which means that the more debt you have the lower the amount you pay for it. In essence you get a bulk discount, in much the same way that you would if you bought your groceries from a wholesaler like Costco or Macro rather than a high street retailer like Asda or Sainsbury’s.
What Are Non Profit Debt Consolidation Companies?
Some debt consolidation companies may charge you a fixed fee of a few hundred pounds for re structuring and reducing your debt repayments which they simply add onto your current debts, whilst others adopt a non profit debt consolidation approach. It is always important to look for non profit debt consolidation companies as these organisations are specifically designed to ensure that you do not have to take on additional debt in order to address your current financial difficulties and therefore provide you with a free debt consolidation service. Instead non profit debt consolidation companies earn money from internet advertising on their site or more normally through donations made by individuals who have been helped out of debt by them in the past. The great thing about non profit debt consolidation companies is that they are not tied into specific finance companies and can therefore offer you advice on the best possible debt consolidation approach. This free debt consolidation service can be invaluable to those who are struggling with debt or need to find ways to get out of debt.
Non profit debt consolidation companies are basically a broker or agent who can re negotiate your debts with a finance company to make your total debt more manageable. Because they consolidate your debts into one larger amount this gives them more power over finance companies to negotiate a lower interest rate and they can then offer you cheaper repayments per month as a result. The service to you is completely free to you if you use a non profit debt consolidation company, but traditional debt consolidation companies may charge you a fee.
For example say you had three separate debts which included;
The individual monthly repayment amounts for each of these could be quite high, especially your credit card debt.
Non profit debt consolidation companies could help by combining (or consolidating) those three debts into one larger debt of £13,000. Because they get a lower interest rate from the finance company for such a large amount, it would usually mean that your monthly repayments were reduced by a few hundred pounds per month. In essence you pay less for your debt because it is consolidated into one large amount. The debt consolidation company essentially provide you with a loan which pays off the other smaller debts and consolidates them into one larger amount with a lower interest rate.
The reason the non profit debt consolidation company can get such a good rate is because finance companies want your debt as one large amount. This is because they will make more money from you if you have one larger debt than if you have five or six smaller debts with multiple companies. You gain because you can access a free debt consolidation service and pay less for your debt overall and your monthly repayments reduce dramatically, which makes more money available for you to spend on your day to day living costs.
When Are Non Profit Debt Consolidation Companies Especially Good?
Credit Card debt is one of the major types of debt that can be difficult to get out of. This is because credit card companies charge such large interest rates, known as Annual Percentage Rates which are frequently between 18 and 25% but for people with a history of debt problems these can be up to 40%! In these cases it is critical to use a free debt consolidation service because you do not want to be adding additional debt to your already overstretched personal finances.
The Annual Percentage Rate is basically a measure of how much you pay for each pound borrowed so an APR of 18% would mean that for each £100 you borrow you have to pay back an extra £18, making it £118. If you compare these rates with personal bank loans or car loans which are usually around 6-8% it is easy to see just how problematic credit card debt can become when you start miss payments and how quickly these debts can add up.
So if you had £4000 on your credit card at an Annual Percentage Rate (APR) of 18% and you start missing payments that means each year you will be paying £720 in interest charges. that is an extra £60 a month!
Non Profit Debt Consolidation companies are very good at helping individuals address credit card debt consolidation issues in these circumstances because they are often able to consolidate you debt with a finance company for a significantly lower interest rate, than the APR you are being charged by the credit card company. This is where they really excel at the job that they do and this can make a substantial difference to your monthly repayments, especially as credit card debt consolidation can enable you to save such larger sums on your monthly repayments as we have explored.
Why Do Debt Consolidation Companies Get Such A Bad Press?
No one likes being in debt, and no one likes companies that have close associations with organisations that allow people to get into debt, so it is no surprise that debt consolidation companies have a negative image. In reality they really can help you re structure your debt commitments into more manageable payments and help you save money in the long term. Of course the best situation is not to slip into debt in the first place, but circumstances do arise and debt consolidation companies can help you address your debt circumstances. Non Profit Debt Consolidation Companies are best because they do not increase your debt by charging you for their services meaning that you benefit from a free debt consolidation service.
Helpful tips when dealing with debt consolidation companies
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