The Debt Consolidation Process

Written by Abby Luttrell
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If you choose to consolidate your debts with the help of a debt consolidation company, you may wonder why your creditors will agree to one single lower payment a month. Your creditors actually welcome debt consolidation. They know when you're in trouble, and they don't want to lose the entire outstanding balance of your loan to bankruptcy or debt collectors.

Your Creditors Will Help

Your creditors will subsidize all or a large part of the debt consolidation process. They are lowering your interest rate and making monthly payments easier for you so that they can get some assured return on their money. Since you will pay a set amount each month to the debt consolidation company, your creditors know that they can rely on a regular payment, even if it is reduced.

The debt consolidation process also allows your creditors to recoup a large portion of their lost interest through tax write-offs. They can recover the principal of the debt through your payments, and recover the lost interest through taxes. So they stand to gain through the whole debt consolidation process.

Once you have worked out your debt consolidation plan with a credit counseling service, the harassing phone calls from creditors will stop within 2 to 4 weeks. This is because your debt consolidation company is now responsible for all your payments to your creditors. They have negotiated with the creditors, and they pay the creditors for you.

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