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Debt Consolidation Comparison Chart
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| Star Reviews debt consolidation reviews enable you to easily compare the best debt and consumer credit counseling services. Read in-depth reviews of debt consolidation services which we think stand out from the crowd. Live Support hours listed are weekdays EST.
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Consumer's Guide To Debt Consolidation
If you have over $10,000 in credit card debt or several loans, you may want to consider debt consolidation. Debt consolidation basically trades in several loans for one combined monthly payment loan. The goal is to secure a consolidated loan with a lower interest rate, fixed rate, better terms or simply for the convenience of making only one loan payment each month.
Most debt consolidation services will require some type of collateral, usually property assets. It is crucial that you are able to make the minimum monthly payments of your consolidated debt so that you do not risk losing your home.
Do your research and find the best debt consolidation company for your particular financial situation. Like most financial services, the debt consolidation industry has produced many untrustworthy entities that you should be wary of at all times. One way to avoid being "had" is to check with the Better Business Bureau, your Attorney General, and local consumer protection agency to find out if any consumer complaints are on file about the business you are considering. Be sure to work only with reputable and credible debt consolidation services whenever consolidating debt.
Debt Relief & Debt Management Services
If you are over your head in debt, there are various services for debt relief and debt management. Debt consolidation may not always be the best route for your situation, but it is one of the options available to you. Here are a few others debt management services you can consider as well:
Debt Settlement - Debt settlement firms may be able to negotiate a lower debt balance amount with your creditors. There are often fees and conditions associated with these services that they are required by law to make known ahead of time. The Federal Trade Commission (FTC) restricts companies from charging any kind of fee before they reduce or settle your debt. Depending on your situation, any money you may save with your reduced debt balance could be considered taxable income. Settlement can be a viable option for debt relief, but you must be wary of any guarantees that the company makes to get rid of unsecured debt in its entirety or that your unsecured debt can be paid off for just pennies on the dollar.
Do-it-Yourself Debt Management - A form of "self-help," do-it-yourself debt management can often lead to better financial decisions overall and the stand-out feature of debt management is that it does not have any effect on your credit score, since you are the one paying off your debt in full and in a responsible manner. Some debt management resources offer free tips and communities where you can interact with others who have been in the same situation. In fact, the best debt consolidation firms will also offer this type of service to help manage your debt and develop a realistic budget so that you don't run into future problems. Debt management companies help you determine your fixed and variable expenses, and then they will help you prioritize them to come up with a reasonable and realistic debt payoff plan and spending goals based on your income. This is a great option to help get you back on track and avoid future debt, but if you are in too deep you may also require debt consolidation in addition to this service.
Credit Counseling - Credit counseling is ideal for those who are unable to stick to self-help practices without a little outside guidance and assistance. Certified and trained in consumer credit, budgeting, and debt management, credit counselors can help you develop an individual plan that caters to your specific money problems. Most offer free educational materials and workshops as well as an extensive initial counseling session followed by several follow-up sessions. Credit counseling is often viewed as the middle ground between do-it-yourself debt management and debt consolidation, though you may still want to consider counseling in addition to other means of debt relief.
Debt Consolidation - Debt consolidation involves combining all of your creditor accounts into one monthly payment. You can reduce your monthly payment amount if the credit counselor negotiates a better interest rate from your creditors; this can be done when the outlook is dire from the creditor's point of view and it seems as though you are not very likely to pay off your debt without the help of the debt consolidation company. Agreeing to a lower rate or payoff amount ensures the creditor they will at least recoup a significant portion of your debt, which is better than nothing. Debt consolidation also puts an end to harassing phone calls for debt collectors, which is a major relief for many consumers in debt.
Debt Consolidation and Your Credit
Consolidating debt or utilizing the services of a debt management company or credit counselor does not directly affect your credit score; however, it can make it difficult to get credit in the future. When you use the service of a debt consolidation or debt settlement company, it shows up on your credit report. While debt consolidation does not hurt your credit score, debt settlement does, and they can both have negative repercussions when creditors see this on your report, making them hesitant to grant you credit in the future.
Information about your debt settlement or debt consolidation plan will only remain on your credit report for as long as the payments are being made. After your account is paid in full, creditors will no longer be able to base decisions on your past and will have to rely fully on what they see at present on your credit report.
Many debt consolidation and management firms do not allow you to apply for new credit before your debt has been paid anyway, so the fact that it is on your credit report may not hurt you in the least. In fact, paying off your debt will help boost your credit score and can improve your chances of getting approved for future credit.
Using Debt Consolidation to Avoid Bankruptcy
Filing for bankruptcy should always be a last resort. While people who file for bankruptcy may not have to repay certain debts, the effects on your credit are severe and long-lasting. The fact that you have filed for bankruptcy remains on your credit report for 10 years, which often makes it difficult to obtain credit or life insurance, buy a home or even land a job.
If you are in so much financial difficulty that you cannot settle your debt on your own, seek help from debt management services, credit counselors, debt consolidation firms and debt settlement agencies before you consider filing for bankruptcy. Debt consolidation may not always be a good idea for everyone, but it is definitely a better alternative than bankruptcy. Consider all of your options and find the best debt consolidation service to help you with your fresh financial start.
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