The formation of debt is not a situation in which one cherishes. It is indicative of problems existing in the financial system. The finances control a lot of activities. All the expenses are made from the personal account of an individual. If there is a lack of money in the personal account, then loans are taken for meeting the expenditure. Spending on different areas of life is common, and so is the disbursal of funds for various purposes. But when the inflow of money cannot meet the outflow requirements, then the problem of a financial crunch arises. Loan applications are often used for acquiring monetary aid for reducing the financial problem, and in many cases, it has been observed that the money issues are solved through the borrowed sum.
The avenues present for procuring a debt consolidation loan
In many cases, more than one loan is taken for stabilizing the financial situation. Peoplealso try to solve one debt with a new loan so that the debt doesn’t grow further. But if the acquired loan is not solved then again, a new debt occurs. If the debts are not solved, then the outstanding only becomes higher with the passage of time.
In such cases for making the debt payment simpler, an option is present. This is known as the debt consolidation option. In debt consolidation, a debt relief agency helps a debtor to join all the debts into one account. Theprincipal outstanding is notreduced by this method, but it definitely helps in paying off the debts in a manageable manner. Many institutes work in the field of debt relief, and most debt relief companies help a debtor to consolidate his/her debts. But the law that governs debt consolidation is the need for the presence of multiple debts. If there are two or three debts consolidation might not be offered. Again, all debts are not consolidated by relief agencies, and it is important to know if the debts are at all covered under the programs of the relief company. A person seeking debt consolidation ought to be aware of the eligibility and legality of the process and should select companies that are legally operating in this field. The presenceof scam companies cannot be stoppedin the online medium, so it is dependent upon the knowledge of the debtor for making the right choice regarding debt relief agency.
Legal criteria for getting enrolled in a debt alleviation program
When a person wishes to avail a debt relief program due to the incapacity of the individual in paying all the debts on time, then he/she should acquire information about the debt relief enlistment criteria. People who have purposefully kept the debts growing in the hope of settling it at a lower amount in spite of a healthy financial condition are not allowed to enter the programs of authentic debt relief companies. The universal guidelines present for almost all debt relief companies include the following:
- Presence of many debt sources that fall within the relief categories of the company:Multiple debts are necessary for getting enrolled for debt consolidation and all the debts should also be present in the category of debts which are solved by the company like multiple unsecured loans from different credit card companies.
- The degree of the insolvency of the person: When a person claims that he/she is unable to make the debt payments then it is clear that there is a financial strain in the personal account of the individual. But the extent of financial damage will be verified by the relief company before allowing the person to enroll for any relief program. False claims are treated as illegal and are punishable. Hence all relief agencies look at the financial condition of the applicant before the enrollment procedure is initiated.
- The presence of funds for making a consolidated payment: Money is indispensable even when a person chooses to consolidate the loans. The consolidated debt sum hasto be paid monthly. Even if the sum is calculated on a single rate of interest still payment is necessary. If the person fails to make payment or has no legitimate source for making payments, then consolidation might not be offered.
Therefore, it can be said that the relief company will evaluate all the financial aspects of the applicant before enrolling him/her for a specific debt relief program. One should know that if false claims for settling loans or declaring bankruptcy is filed then subsequent legal penalties will be applied which can never be good news for the applicant. Hence it is very important to remain truthful in this regard because wrong claims will attract legal action.
The aid provided by the loan amount for paying the consolidated debts
Some debt relief companies’uponevaluation of the person’s outstanding balance and credit paying capacity can arrange a consolidationloan for paying the debts. This is known as a debt consolidation loan. This form of credit implies that the debtor will be free fromall the previous debt sources and will be required only to pay the loan taken for resolving the consolidated debts. This is speciallydone to close the multiple debt accounts. The presenceof debts from various sources impacts the credit score of a person. If the debts are kept open for a long period of time, then the credit score will reflect that. Apoor scoreis not viable economically so the consolidation loan will provide the opportunity to solve all the credit balances in an instant. This loan is a calculated sum of money that is necessary for paying all the debts. Hence when all the debt accounts are closed the person no longer has to remain anxious about the negative impact on the credit score due to long-standing dues.
The consolidation loan can be paid back within a specific span of time and generally, the time is quite long so that the person concerned can recoup from the financial losses and also make steady payments regularly.