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Credit Counselin Vs. Debt Consolidation - Which Is Right For Me?
By: Eric Quinn
Debt consolidation and credit counseling are similar services that assist
individuals in getting out of debt.
Debt consolidation agencies help to minimize interest rates and therefore the
monthly payments. The replacement of several monthly loans by a single loan at a
lower interest rate and sometimes with an extended repayment period can be of
significant assistance to a person in debt. A single secure loan can lead to the
interest rates dropping by as much as half. The debt consolidation company
interacts with the collection agencies and credit card companies on behalf of
their client and along with a reduced rate, they can also negotiate for
elimination of late fees and a reduced balance. Debt consolidation is not
applicable to secure loans such as mortgage loans and car loans but is very
useful for unsecured credit card loans.
Debt consolidation is received well by the creditors who prefer it over
bankruptcy. Debtors can get out of debt by using debt consolidation and maintain
a good credit record, something which would not be possible if they filed for
bankruptcy. Debt consolidators may charge a fee upfront or charge service fees;
given that most debt consolidation companies are non-profit, these fees are
usually quite affordable. Debt consolidation is ideal forsome people who wish to
get out of a debt as quickly as possible without juggling their finances in a
major way.
Credit counseling organizations also assist consumers in clearing their debts.
Credit counseling organizations were first started by the credit card industry
that was looking for a way to ensure that their debtors not file for bankruptcy.
Consumers who participate in a credit counseling program normally have a certain
amount of debt with reference to the monthly income. One may not qualify for a
credit counseling program if in the creditor’s opinion the debtor has the income
to make the payments.
Credit counselors interact with the creditors on behalf of their clients to
secure a revised monthly repayment schedule, a reduction in the interest rate,
or a waiver of the interest charges, if possible. Credit counseling services
assist with unsecured debit like credit cards, auto loans, medical bills,
attorney bills, etc. Well-established credit counseling companies can even
negotiate with creditors on behalf of those who have defaulted on secured debt
repayment and help them to pay the arrears as per an agreeable plan, thereby
avoiding foreclosure and repossession. Credit counseling is recommended for
those who wish for a complete alteration in their finance management and require
assistance from a third party to assess their financial options. It is not
uncommon for creditors to pay the credit counseling fees on behalf of the
debtors in order to encourage them to repay the debts. Unlike debt consolidation
services, credit counselors provide useful advice for not only getting out of
debt but also staying out of it.
About the Author:
Eric Quinn recommends that you visit www.incharge.org for more
information on credit counseling.
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