Debt consolidation is very common nowadays but many people do not really know what government backed credit card debt consolidation is. It is in fact one kind of financial assistance provided by the Federal Government to people in debt, especially those who are having credit card debt.
This loan is used to pay off their outstanding balances. For people who are qualified to take up this specific loan, they will be able to become financial stable again in the near future without spoiling their credit score.
For people who are currently suffering from deep credit card debt, first thing first, you must know the key facts about this loan before you apply for it. Not everyone in debt can apply for it.
Fact No.1: Basic concept of the loan
In general, government backed credit card debt consolidation loan follows the same fundamental guidelines as other debt consolidation loans in the private sector but it contains some minor variations. Under this government backed program, restrictions have been set on the types of debts that can be consolidated. Not all types of debts can be lumped into one loan.
Hence, if you have intention to look for this type of loan, you are reminded to do thorough research in order to determine whether all your debts fit the government backed program. It is no point for you to consolidate your debts if most of them are not allowed under the government’s rules
Fact No. 2: Types of loan
In United States, the most commonly issued government backed loan is the student loan. There are 2 most popular programs nowadays, i.e. Direct Debt Consolidation Loan Program and The Federal Family Education Loan Program.
These programs are offered to students in colleges and universities with the objectives of helping them to consolidate multiple student loans into one single “low- interest” loan. By doing so, the students or graduates are able to overcome their financial hardships in an easier manner, especially during economy downturn.
Fact No. 3: Functions of this loan
Government backed credit card debt consolidation loan is indeed a cost saving loan. As all of us are fully aware that the interest rates for all credit cards in the market are normally high, by taking up a government backed loan, it helps to reduce the total debt amount of the debtors.
Even if compared with all sorts of individual credit loans in the market, the interest rate for this typical loan is still much lower. At the same time, this loan encourages the debtors to manage their debt in a proper way as they just need to focus making payment on ONE loan. It eases the process of gaining control over the finances.
Fact No. 4: Loan providers
A majority of lenders working with this government backed program usually offer several different types of payment options to their clients, based on their financial needs and requirements. At the same time, the loan is only provided after assessing the clients’ financial position. There are business oriented organizations as well as non profit organizations offering this type of financial solutions to people in debt.
They help to combine the clients’ financial liabilities through the government loan. In order to look for reliable service providers, the consumers are advised to refer to US Department of Education or their local consumer protection agencies to find out the details.