If you are looking into debt consolidation, seek credit counseling from a reputable company. You will want to make sure that you have considered all the available options and are making the correct decision in how to handle your debt.
When you seek debt consolidation counseling, the counselor will be able to help you consider what is best for you and your situation. Because the counselor understands the options, they will be able to direct you down the right path.
The credit counselor can discuss the benefits and downfalls of the various debt consolidation options. One option they should mention is a debt consolidation loans. The main benefit these loans provide is that they can pay off your debt and allow you to pay in one consolidated payment. This is quite convenient. However, the convenience comes at a cost. Because of poor credit, you will often get a high interest rate that might even be worse than that on your individual accounts. If the debt consolidation loan saves you, it could be minimal.
Another option the debt counselor might mention is debt settlement. This is for the most extreme of cases and certainly is not beneficial to everyone. It allows the debt settlement company to strike a deal with your creditors, cutting your debt significantly. However, it can be harmful for your credit and may still be hard to pay off. Often, it should only be tried after other options are not working out. Make sure you understand that debt settlement requires additional payment of tax on "forgiven debt" through a 1099-C form.
A type of debt consolidation that is frequently brought up in credit counseling is a debt management plan. Debt management plans allow you to pay a consolidated payment, just like a debt consolidation loan. However, you will retain the original accounts as the debt management company will distribute your money between each company. This method of debt consolidation can save you money on interest and fees. This course is a good option for many who struggle with paying off debt.
A debt management plan can be developed by a trained credit counselor that has evaluated your financial situation. They will tailor it to meet the needs of you and your creditors.
When looking at the options available for getting rid of debt, seek debt consolidation counseling from an accredited counselor to help you wade through the possibilities.
Ronnica Rothe graduated Magna Cum Laude from the University of Oklahoma. She is currently enrolled at Southeastern Seminary in Wake Forest, NC.
She is a regular contributor to educational information disseminated through Personal Financial Network. You can receive free debt consolidation counseling from an Accredited Financial Counselor.
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