Debt Consolidation Negatives – Make Them Positives!

These aspects are often cited by loan lending institutions as a means of acquiring new customers. However, there are a few negative aspects to the debt consolidation process as well. The key to a happier financial situation for the debtor is to make those negatives into positives!

“…One of the biggest negatives of consolidation loans is that they often involve a reasonable amount of account settlement with the original creditors. This might sound like a major positive in and of itself. However, when a debt is settled for less than what the contracted amount is worth it will negatively impact an individual’s credit rating. When someone has a large number of outstanding balances in arrears that are suddenly, settled, paid off, and closed down their credit scores can take a fairly substantial hit initially. This is a fact that many would-be lenders generally do not speak of with their clients. Honesty financial specialists will discuss with their clients prior to proceeding with consolidation processes…”

How then does this negative aspect become a positive one? What good is it to pay off debts if it will simply lower a credit rating even further? The fact is that even though an account might take a temporary hit it will improve dramatically in short order with all of those accounts paid in full. A short painful time with a score lower than ever will be replaced by rapidly rising scores as the weeks pass by. This is because the individual is no longer hemorrhaging money. If they are paying their consolidation loan in a timely manner it will continually bolster their rating. Another positive of paying off so many accounts at once is that it shows that the individual will make good on their promise to pay. This can cause a score to rise anywhere from twenty to a hundred points and more in a very rapid time.“…Another tactic that can be used successfully is partial payment consolidation practices. This is a financial plan utilized by more experienced individuals. In this method the borrower will pay off only the newest accounts and accounts in collection status in their report immediately. The rest will be brought up to active status via paying the amount that is currently owed only. The individual will then continue to make monthly payments on these active accounts and their consolidation loan. This completely erases the negative credit hit aspect and adds on several positives. Older accounts that are considered to be in good standing will attribute greatly in the increase of a credit rating…” added A. Lillo.

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