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Credit Counseling vs. Debt Consolidation - Which is right for me?
from: Eric QuinnDebt 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.
Eric Quinn recommends that you visit http://www.incharge.org for more information on credit counseling.
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