Debt consolidation is the process of combining outstanding bills, balances, and loans into one package with a goal of simplifying the payments to one group and reducing the overall cost to the borrower.
Why Consolidate Debt?
Debt consolidation can really benefit people who have many bills or a high debt level. By consolidating many people are able to focus on paying on time and eliminating late fees and penalties of not making minimum payments. It can be too easy to forget to make a payment if you are not using automatic payment or auto debit from a bank account. And when finances are stretched thin you may find yourself constantly juggling and moving money between bank accounts. That is when it’s easier to miss payment deadlines and incur even more expense.
People with big credit card debts may be able to lower the overall interest rate on outstanding or revolving debt. Credit cards may have Annual Percentage Rates (APR) of 20-30%. Debt consolidation can lower the cost of debt with lower interest rates.
Debt Consolidation is intended to replace many current debts with one debt. But Debt Consolidation is intended for people with good to medium credit scores. People with low or bad credit can use Debt Relief companies to negotiate with current lenders on a borrower’s behalf. This can work for debts including Credit Cards, Personal Loans, Medical Bills, Individual Lines of Credit, Some Student Debts, Business Debts, and Collections and Repossessions.
How We Help Manage Debt
Thompson CPA can review all of your current payments, bills, loans, taxes, obligations, and income to help you create a plan for debt payoff which may include debt consolidation. We can connect you with trusted debt consolidators or debt relief providers. If you have IRS or Franchise Tax Board personal tax debts, we may be able to represent you before the IRS or FTB to get debt or fee reductions and a plan that you can meet for repayment.