Debt Consolidation and Consumer Credit Counseling

A debt consolidation loan is a viable means of paying off your debt, but I do not recommend it. If you have credit card debt or are enrolled in credit counseling and do nothing, your creditors can report you to the credit bureau and make numerous collection calls, but that is about it. However, if you have a debt consolidation loan and cannot make the payments, the consequences are much more severe. Your creditor can start foreclosure proceedings on your home. Many people have debt consolidation loans, but there are better ways.

Consumer credit counseling is a form of consolidating your debts, but it does not require a loan. Debt counseling is a way for people to get out of debt without incurring additional debt. A debt management agency can help you get on a plan that will help you have your unsecured debts paid off in five years or less. If it takes longer than five years, you may want to consider other debt relief options.

• Pros and Cons of Consumer Credit Counseling and De...
• Consumer Credit Counseling Can Be Beneficial To Yo...
• Debt Help - Debt Consolidation Loans Versus Credit...

Pros and Cons of Consumer Credit Counseling and Debt Consolidation

Similarly, debt consolidation offers hope for debt elimination. Debt consolidation may take different forms, but the eventual goal is the same: the combining of multiple forms of debt into one loan, simplifying budgeting and repayment. There are two types of consolidation loans, secured and unsecured. Secured loans require collateral such as a house, automobile, or some other tangible piece of property the lender may confiscate if payments on the credit stop. The most common types of secured debt consolidation are home equity loans and mortgage refinancing. On the other hand, unsecured loans are personally guaranteed and involve no collateral, so if payments are not made a third party collections company would become involved to secure what is owed.

Consumer Credit Counseling Can Be Beneficial To Your Financial Well Being

Before signing up with the first credit-counseling agency you find please make sure to do your research. Although many of the companies are reliable and trustworthy there are a few that give the industry a bad name. Most of the legitimate companies offer their services for a small up front fee. Definitely avoid any that offer to settle your debts for free or with only a small upfront payment of $75 to $90. Most of the companies that fall in that category usually wind up as unreliable and are only good for taking your hard earned money with zero return on investment. You can verify the legitimacy of a consumer credit counseling agency by checking to see if they are registered with the Association of Independent Consumer Credit Counseling Agency or the National Foundation for Credit Counseling. Both of these companies will have reputable counseling agencies as registered members.

Debt Help - Debt Consolidation Loans Versus Credit Counseling

What Debt Consolidation Loans Can Do For You

Debt consolidation loans can reduce the interest rate you are paying on unsecured debt, like credit cards, and lower your monthly payments. You can choose to use an equity loan with its tax deductible interest or a personal loan. Many lenders offer competitive rates, which you can find by researching companies online.

A loan gives you more control over interest rates and payment schedules than with other options. Not only can you get low rates, but you can decide to take longer than five years to pay back your principal. By taking longer, your payments are lower, giving you financial breathing room.

However, a debt consolidation loan should be part of a larger financial plan that includes budget planning and long term financial goals. If you don’t have these things in place, you may find yourself in deeper financial trouble by taking out a loan.