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Consolidation Loans While In A Debt Settlement Program

Consolidation Loans While In A Debt Settlement Program

Clients in a debt settlement program may become eligible for a consolidation loan.   A consolidation loan creates an opportunity to expedite the debt settlement process, but these loans come with pros and cons that should be understood by the client.

HOW CONSOLIDATION LOANS WORK

The consolidation loan provider will loan you money that is deposited into your special purpose account.   Once the funds are there, we will use those funds to negotiate settlements with all of your enrolled creditors.   This allows you to finish the program faster.   You will then be making a monthly payment on the loan to the lender.

 

Once your creditors are paid off and you are making your consolidation loan payments on time you will have the following benefits:

  • You will be able to improve your credit score each month

  • You will no longer be paying monthly service fees to a special purpose bank account or to any litigation insurance plan that you may have purchased

  • You will have eliminated the risk of being sued by your creditors

  • Any creditor contact and collection calls will stop

  • Once your credit score improves, you can shop for another consolidation loan with a lower interest rate

 

The disadvantage of a consolidation loan is that it will most likely take longer to pay off a consolidation loan than it will to complete our program on the original schedule, which will end up costing you more money.   You will still, in the end, can enjoy significant savings and benefits from the debt settlement program.

 

MAKE SURE YOU UNDERSTAND THE TERMS OF THE CONSOLIDATION LOAN

However, the absence of a prepayment penalty in the particular loan being offered in this case allows you the opportunity to fulfill your obligations as quickly as your individual circumstances allow you to do so. Of course, early repayment may result in significant savings on interest charges.  A person can also refinance or get a better loan to pay their first consolidation loan.

 

Opting to take a consolidation loan is a personal decision that you must make based on your priorities.  Accepting the loan gets you out of our program with savings and has you building positive credit sooner than you would otherwise.   Rejecting the loan will keep you in the program longer, which delays your rebuilding of credit but can increase your savings.

 

Advantage Law does not own or control any lender nor does it receive compensation from any lender.  While we may know and trust certain lenders, it is important for you to know that you might also be eligible for loans from other companies.  When considering consolidation loans, read the agreement and pay special attention to the interest rates, origination costs, and if there is a cost to pay off the loan early.  This article provides some useful information about consolidation loans:  https://www.nerdwallet.com/best/loans/personal-loans/best-debt-consolidation-loans-for-bad-credit

 

Historically, less than 20 percent of our debt settlement clients become eligible for a consolidation loan.  If you become eligible for a consolidation loan, please remember that our attorneys are always willing to speak with about consolidation them.

 

Author: Attorney Mathew Higbee, revised 1/10/2023