By Kenneth Long
Before you go through with debt consolidation, receive counseling from an accredited credit counselor. Credit counseling can provide you with the dependable advice you need to make wise decisions regarding your finances.
Many nonprofits offer credit counseling. The credit counselor can show you your debt consolidation options as well as help you determine which option is right for you in your situation. They can discuss the pros and cons of loans, debt management plans, and debt settlement.
Depending on your debt balances and your situation, you may be advised against getting a debt consolidation loan in credit counseling. These types of loan can be quite convenient as you will no longer owe to the other companies. However, the loans generally do not have a good interest rate. The benefit of having one consolidated payment is not worth having to pay more.
If you had lower amounts of debt, then a consolidation loan might make more sense. The combination of having high credit card balances and paying only the minimum payments each month will lower your credit score to the point that a consolidation loan is not an attractive option. Your credit counselor can discuss this with you to help you understand the feasibility of a loan.
If you do have high credit card balances, one option that may be recommended is a debt management plan. Debt management plans have the same benefit of one consolidated payment as loans do, however they are not actually loans. Debt management plans allow you to keep your original accounts, but pay them through the debt management company. There are additional benefits available through a debt management plan. You save through eliminated nuisance fees on many accounts. You may also get lower interest rates and lower payments.
Your credit counselor will probably discourage you from going through debt settlement. This can be potentially harmful to your credit report and should only be used in extreme cases. Never do debt settlement unless you have discussed with your credit counselor other options.
Another benefit of speaking to a credit counselor is the extra advice you will receive. In credit counseling you can receive other tips to help you to cut costs and start saving more money. You can find out complementary steps to take alongside any debt consolidation you are receiving. Seek credit counseling if you are wanting to take care of your debt.
Kenneth Long began his public service with nonprofit organizations in 2001. He has since conducted workshops teaching other nonprofit executives how to integrate credit counseling with volunteer tax preparation programs. Long is a graduate of the University of North Carolina at Chapel Hill and received his Certificate in Nonprofit Management from Duke University.
You may find more information on debt consolidation through credit counseling through Personal Financial Network, Inc.
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