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Debt Consolidation in Cambridge, Massachusetts: A Helpful Guide
Living in an expensive area like Cambridge can make it easy to rack up credit card debt. Rent, childcare, student loans – it all adds up. Before you know it, you’ve got a few maxed out cards and you’re barely keeping up with the minimum payments each month.If this sounds familiar, you’re not alone! But don’t panic. Debt consolidation through a nonprofit credit counseling agency like ours can help you get back on track. Keep reading to learn more about how debt consolidation works and why it may be the ideal debt relief option for Cambridge residents struggling with high-interest credit card balances.
What is Debt Consolidation?
Debt consolidation simply means rolling multiple debts into one new loan or payment plan. The goal is to simplify repayment and often reduce interest rates so you can pay off what you owe faster.With credit card debt consolidation specifically, a counseling agency like ours works on your behalf to negotiate lower interest rates and waived fees with your creditors. We then set up a debt management plan (DMP) where you make one monthly payment to us and we disburse funds to your creditors.On average, our clients see their interest rates reduced from 22% down to just 8% APR. This saves you money on interest and helps you pay off debt years faster than making minimum payments on your own!
Top 5 Benefits of Nonprofit Debt Consolidation
- Lower interest rates. Interest makes up a huge chunk of credit card balances. By negotiating reduced rates around 8%, we save clients an average of $150 per month!
- Single payment. No more tracking multiple due dates and sending payments to various creditors. You make one payment to us each month.
- Fixed payment term. DMPs have a set end date, usually around 4 years. This keeps you motivated and focused on the finish line.
- Save money. In addition to less interest, your creditors may agree to waive certain fees once you’re on a DMP. This reduces the total amount you repay.
- Get out of debt. Our clients pay off debt in around 4 years. Much better than the decades it would take only making minimum payments!
Who is Eligible for Debt Consolidation?
If you have at least $5,000 in unsecured debt like credit cards, medical bills, or personal loans, consolidation may help. Your exact credit score or income isn’t too important, as long as you can afford the monthly DMP payment.Debt consolidation works best for people who are overwhelmed by high-interest debt but could afford a more reasonable monthly payment. If you’re already behind on payments or dealing with debt collectors, consolidation can provide relief.However, consolidation isn’t a magic fix for debt. You still have to make payments each month. If your income barely covers living expenses, you may need to look at other options like debt settlement.
How Does the Debt Consolidation Process Work?
Here is an overview of what to expect if you start a debt management plan with our agency:
- Free consultation: Speak with a certified credit counselor about your financial situation. They’ll recommend whether consolidation is right for you.
- Enrollment: If you choose to enroll, you’ll provide details about your income, expenses, and debts. This helps us set up your account.
- Proposals: We contact your creditors with proposals for reduced interest rates and waived fees based on your situation.
- Monthly payment: Once proposals are accepted, you begin making one fixed monthly payment to us via check, money order, or online.
- Payoff: We disburse your funds to creditors until all debts are paid off (usually within 4 years).
- Debt-free: Once your balance reaches $0, the DMP is complete and you are debt-free!
The whole process is designed to be simple for you. We handle contacting creditors and negotiating on your behalf. All you have to do is make payments!
What Debts Can Be Included?
For the best results, focus on consolidating high-interest unsecured debts like:
- Credit cards
- Department store cards
- Personal loans
- Medical bills
- Payday loans
Debts like student loans, auto loans, and mortgages usually can’t be included. The great thing about only consolidating credit cards is that these likely have your highest interest rates. Getting those reduced makes a huge impact!Aim to include at least $5,000 in debt to make consolidation worthwhile. You can start with just one card and add others down the road.
What Are the Costs?
As a nonprofit agency, our debt management services are offered at very low cost. There are no hidden fees or surprises.When you start a DMP, there is a one-time setup fee of around $50. Then each month you pay a small maintenance fee of $30-50. That covers our costs of providing dedicated account management and disbursing payments.The monthly fee works out to around 1-2% of the total debt amount. So on a plan for $10,000 of debt, you would pay $100-200 in fees over the entire term.Considering consolidation saves the average client over $6,000 in interest, the fees seem pretty small in comparison!
Will This Hurt My Credit Score?
Any late payments or collections activity on your credit reports will continue to negatively impact your score as you start debt consolidation.However, responsibly making on-time payments through a DMP demonstrates good financial behavior. As your balances decrease and your mix of credit types improves, your score should start to rebound.Debt consolidation alone won’t rebuild your credit. But it gives you the opportunity to “reset” and start fresh. Focus on making reliable DMP payments, keeping credit card balances low, and limiting new credit applications. This will help your score trend upward over time.
Compare Debt Consolidation to Other Options
Debt consolidation through a nonprofit credit counseling agency offers a nice middle ground between DIY debt payoff and more drastic options like debt settlement or bankruptcy.
|Debt consolidation||– Lower interest rates
– Fixed payment term
– Helps rebuild credit
|– Monthly DMP fee
– Discipline required to follow payment plan
|Minimum payments||– No fees
– Flexible payments
|– Interest keeps balances high
– Takes decades to pay off
|Debt settlement||– Settles debt for less than owed||– Fees can be high
– Hurts credit badly
– Tax implications on settled debt
|Bankruptcy||– Wipes slate totally clean||– Damages credit for years
– Legal fees
– Assets may be forfeited
For many in Cambridge struggling with credit card debt, consolidation offers the best of both worlds – saves money through lower interest, but avoids drastic measures like bankruptcy.
How Can I Get Started?
If you carry at least $5,000 in credit card or other unsecured debt, the time is now to explore consolidation!Our certified credit counselors offer free consultations to review your financial situation and see if debt relief could help. You can:
- Call us at (800) 555-5555 to speak with a counselor over the phone
- Request a callback on our website and we’ll contact you to schedule
- Start an online chat during business hours for immediate answers
During your free consultation, we’ll pull your credit report to analyze your debts and interest rates. We’ll also discuss your income, expenses, and goals.
From there, we can recommend whether consolidation is your best option or if you should consider alternatives. There is no obligation to enroll if you complete the consultation.Thousands of Cambridge residents have found freedom from credit card debt through our debt management program. We’re ready to help you too! Give us a call today to go over the specifics of your situation and get personalized advice.