Credit consolidation companies work similarly to debt settlement companies. They often provide lower interest rates and monthly payments that can make life easier financially. But how do they stack up against debt settlement? Let’s compare the pros and cons.
Debt consolidation programs are not new. In fact, credit consolidation companies have existed for years, but they haven’t become quite as mainstream as debt relief programs. Credit consolidation programs work by locating an affordable means for consumers to repay unsecured debt and still have adequate funds to meet the expense of basic necessities such as food, shelter, clothing and basic utilities. The word “consolidation” has a lot of ground on the debt relief industry. These consolidation programs allow consumers to reduce their monthly payments and get out from under the heavy burden of high interest debt balances.
As with debt settlement, there are several choices when it comes to choosing which credit consolidation companies to use. Each has its benefits and drawbacks. The best debt relief programs utilize the same services and provide similar benefits. A few factors that you should consider:
Bankruptcy vs. Management Programs Both debt settlement and bankruptcy are serious financial issues. In addition, neither is particularly good when it comes to long-term results. Bankruptcy is a quick fix; it does not create any long term changes to your circumstances. On the other hand, management programs offer long term changes, especially when it comes to your credit score and ability to gain access to certain types of loans. Bankruptcy will affect you for seven years. Management programs will affect you for five years.
Credit Counseling vs. Debt Settlement A consolidation firm will work with your creditors to help lower the amount of money you owe each month. During this time, you make one payment to the company and they distribute the money to your lenders according to the arrangement negotiated. You do not have to worry about paying multiple bills each month because you are only paying the bill that your creditor agreed to. On the other hand, settlement involves a negotiation between you and your creditors. It is a less stressful process but you must be willing to cooperate with your creditors if you wish to secure debt relief.
If you obtain a credit consolidation loan, you will likely pay less each month than you currently pay on your credit cards. Your credit score will increase, making it easier to qualify for loans in the future. With this one monthly payment, you will be able to have more control over your finances, and eventually, be able to get out from under your heavy debt burden.
Nonprofit Credit Counseling Vs. For Profit Credit Counseling If you have decided to use a credit consolidation program, the next step is to look for the best debt consolidation companies to work with. One of the first places you should look is the Better Business Bureau. The BBA will provide you with information regarding the history of the company and whether or not they have had any complaints lodged against them. You will want to work with a nonprofit organization so you do not have to worry about being taken advantage of by any business that might charge you a fee for their services.
Many reputable credit counseling agencies will also offer free information and referrals to the best credit consolidation programs. These organizations will take the time to evaluate your financial situation to determine the best program to fit your needs. They will also work with you to develop a personalized budget that helps to ensure you never fall into the same trap again.