subject: Bad Credit Problems - Should You Contact A Debt Consolidation Company? [print this page] More people today find it difficult to pay for their everyday bills, let alone those that come from using credit cards or medical expenses. Those individuals who cannot pay their expenses on time each month often end up with blemished credit reports and lowered credit scores. Many people think about taking out a bankruptcy to avoid the challenge of rebuilding their credit, which can take years to accomplish if they do not have professional help. However, others find it simpler to undergo bad credit debt consolidation loans, a program that helps them pay their bills each month and improve their credit ratings.
Agencies that help clients with bills employ counselors who are knowledgeable of credit protection laws and who have skills to work with clients' creditors. They assess how much debt a person has and then set up a repayment plan that the person can pay each month. The amount of money that is paid each month is distributed among the client's creditors until each account is satisfied.
Once the accounts are paid, clients are generally advised to close the lines of credit to avoid falling back into financial chaos. Rather than have no credit at all, however, people may be encouraged to open secured lines of credit, such as a prepaid charge account, which uses a security deposit as collateral against the account.
Clients are also typically advised to undergo financial counseling. Counseling helps them learn how they made mistakes in the past and how to avoid these mistakes with future spending habits. They learn how to budget, how to save money, and how to live within their financial means. Many times, this counseling is a requirement of consolidation programs. Some programs award people certificates of completion, which then may be used as a reference when they apply for a home loan.
Many programs have other requirements before clients are allowed to enter an agreement with agencies. The most common requirement centers on whether or not a person is a legal resident of the country. Being a legal resident of the country helps the agency know that the client cannot flee to another country and avoid paying the debts. Creditors may be reluctant to enter into a payment schedule with someone who has dual nationality or who is not a resident.
They also cannot legally enter into an agreement with someone who is not an adult. People must be at least eighteen years of age before they can sign a contract. If they sign it without being of legal age, the contract will be nullified and voided. That leaves the agency and creditors both with no way to proceed with paying off that person's bills.
Agencies also typically want to verify that clients have solid incomes before the counselors proceed with setting up the arrangement. Individuals who are unemployed or underemployed cannot be relied upon to uphold their end of the agreement. They may not have enough money to put toward the debts or they may not work enough hours at their jobs.
As long as these requirements are met, many people can undergo bad credit debt consolidation loans. This situation allows individuals to pay off their debts. It also helps them avoid taking out a bankruptcy.
