One of the greatest advantages of refinancing is debt consolidation, which can save a homeowner thousands of dollars a year. A debt consolidation loan is a program specifically designed for you to get a handle on your bills. A lender will negotiate with your debtors and design a plan for you to pay one low, monthly payment. These consolidation programs are usually able to drop the interest rates by extending the payment period, or term of the loan.
Late fees and other charges are then avoided, and a positive step is taken toward repaying your debtors. High-interest credit rates, such as with a credit card, will then be replaced with the lower rate and your payments may be tax-deductible as well. All of these factors combined equal lower monthly payments and, consequently, more money in your pocket.
As a debtor, realize that you have certain rights and if you have fallen behind in your payments, make sure that you understand them. For instance, under the Fair Debt Collection Act, a debt collector is not allowed to call you at inconvenient times during the day, threaten or verbally abuse, or use the telephone to harass you. And, if you write a letter to the company asking them to stop calling you, they must comply. However, common sense says that this does not make the debt disappear and you are still in danger of ruining your credit or being sued. If you wish to contest the debt, you should do so within 30 days.