Do Debt Consolidation Services Really Work? | Debt Consolidation

By WilliamBlake
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The best way to handle any debt is to be able to pay it off without any help. Sometimes that just can't happen. Making minimum payments can sometimes be a challenge if your situation changes.

Debt consolidation is a solution sought out by many debtors who are in too deep. This can be achieved by transferring all debt to a low-interest credit card, or by taking out a home equity loan. There are also debt consolidation or credit counseling services that consumers can utilize.

How Does Credit Counseling Work?

With credit counseling, you work with the creditors for a lower interest or payments. Late and over-the limit fees are often forgiven. The client sends just one single payment monthly to the credit counseling agency to be distributed to the creditors.

The Pros

If you're unable to negotiate lower rates and payments with creditors on your own, a credit counselor can usually do it for you. This will save you money and help you get your debt paid off more quickly. The credit counselor can also help you write a budget to help you stick to the payment plan while still being able to afford all of your other expenses.

The cons

One problem with credit counseling is that it sometimes does not result in a monthly payment that the client can afford. Creditors are only willing to negotiate so far, and if you owe a lot of money you may not be able to afford the best deal they will give you. If that is the case, you'll have to either find another means of paying your debt or consider bankruptcy.

Credit counseling services charge fees that are added to your monthly amount. If they don't do this they will usually obtain the money from your debtors as a part of your payment.

There is some debate as to how going through credit counseling affects your credit. It is noted on your credit report. In most cases, you can't get new credit until you complete the program. But it could also affect you after your debts are paid off. Many lenders consider credit counseling as being similar to Chapter 13 bankruptcy.

Check out a prospective counseling agency first. Just because they deal in credit counseling, it doesn't mean that they are all honest. The Better Business Bureau can help you with this.

It's important to weigh the pros and cons of credit counseling. You may not need to involve another party if you just take the time to work with your creditors first.

About the Author

Bankruptcy should be your last resort. Have you thought about debt consolidation and other ways of dealing with your credit card debt or other forms of credit? Visit the Debtopedia website at http://www.debtopedia.com for more helpful information

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