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Owning your own debt consolidation company can be both lucrative and rewarding. Those who work in the debt consolidation industry genuinely enjoy helping others and their community. Although there is estimated that 76% of Americans scrape by paycheck-to-paycheck there is help for those who have fallen behind in payments and accrued debt. Your debt consolidation business‘ plan is there to guide them to become financially independent.
In the current economy, consumer financial debt is growing at an astounding debt. According to ValuePenguin, the average student loan debt per person borrowing is $32,731. The estimated number of students borrowing is 44.7 million. The age of students who are attending school is also increasing. Student debt for borrowers age 60 and over has seen a 1,256% increase since 2004!
Debt Consolidation Industry Defined
When consumers contact you for help with debt consolidation, they are seeking to combine all their debts into one new loan. After all the debts are combined the consumer will have one monthly payment and only one interest rate to pay. In most cases, the debt consolidation loan will have a longer payment period and lower interest rate than the original outstanding debts. Repaying with the new terms makes it easier for the consumer to manage.
Debt consolidation is a perfect way for tapped-out consumers to manage crushing debt load. The lower interest rate and single payment allow the consumer to gain better control of debt. Not only does it allow for better management, the consumer then pays down its outstanding debt.
Although with the longer payment period the consumer does stay in debt longer, the overall debt is managed better. There are other methods to pay off debt, but many consumers are more comfortable with this option.
Reasons for the Consolidation Business
When working with consumers to manage their debt it is important to understand that not all cases are the same. Each consumer will have reasons why they have fallen into debt. Some of the main reasons are:
- Student Loan Debt
- Loss of Employment
- Credit Card Overspending
- Injury Resulting in Loss of Work
- Emergency (Unexpected)
- Lack of Budgeting
These are the consumers who turn to your debt consolidation company for help and guidance. Many of these same consumers may be on the verge of losing their homes and possessions. It is important to always keep in mind that when the consumer seeks your guidance, they are trusting you and your business.
Each client has a different set of circumstances and there will be different plans that can be enacted to suit the case.
Common debt consolidation plans
The most common debt consolidation plans are:
1. Secured Loans
If the consumer owns real estate or a home these can be used to help pay off the outstanding debts. There are two options for those who want to consolidate debt. First, if there is equity in their homes there is the option of refinancing. If a home is valued at $500,000, for example, but is mortgaged for $400,000, the borrower can apply to refinance the home at $500,000. The difference would allow them to pay off outstanding debts. However, it is important that the borrower understands the risks involved. If the loan is not paid the lender can foreclose on the property.
2. Unsecured Loans
Unsecured loans are one of the most frequently used methods of debt consolidation. An unsecured loan is a loan given by a lender or bank for a consumer to apply to consolidate debts. The loan will have a fixed interest rate that will remain the same throughout the loan period. The drawback of the unsecured loan is that if the consumer must qualify for this type of loan which can be difficult for those who are strapped financially due to outstanding debts.
3. Balance Transfers
Another way to deal with debt consolidation is the plan to use balance transfers that are offered by credit card companies. The rule is to transfer the outstanding debts from high-interest cards to a single credit card with a lower interest rate. For example, the consumer transfers the outstanding balance from two credit cards with interest rates of 15% to a single card with an interest rate of 9%. Many credit card companies offer enticing deals like no payments for the first 6 months.
Merchant Services for Debt Consolidation
For companies that are looking to start up in this space, there are a few things that need to be in order before you begin. But many of those things are obvious and outlined in a straightforward way with a simple internet search. But one of the aspects that most business owners in this space don’t consider is payment processing. In order to process credit card payments, your business will need a merchant account.
When applying with traditional banks and payment processors, your business will be rejected. There are a few reasons why this happens. The first is due to the types of clients your business provides a service to. They have financial difficulties and issues with paying back loans which increase the risk of chargebacks. Secondly, this industry is considered high risk because they exist almost completely online. Ecommerce companies have a higher risk for fraud and banks just do not want to take the risk.
The only way to process debit, credit, and high risk ACH payments securely is with a high risk merchant account provider. With the correct partnership, they will specifically cater to this industry and get you set up with a bank that knows your industry and how to mitigate its risk. These are also the experts that understand your business and what it offers to consumers.
Locate a High Risk Payment Processor
Unfortunately, without the right merchant account provides your business could face held funds and account closure. Use high risk payment processors to help to keep your business more secure. Integrate a secure virtual terminal and payment gateway to help your business stay running stress-free.
To do this, apply for merchant services for debt consolidation. A designated representative will work with you and your business to get the account up and running so that you are able to process customer credit card payments seamlessly.
Providing debt consolidation services does not mean that your company must worry about having credit card payments not being processed securely and quickly. With a high risk merchant account provider there is less stress and you are able to focus on other aspects of running your business.