Credit Counseling vs Debt Consolidation

There are more than a few ways to get yourself into debt and just about as many ways to deal with it once you do.  Two of the more popular methods are credit counseling and debt consolidation.  Both of these options have their advantages and pitfalls that we shall outline in the following paragraphs. 

Either of these methods of debt control is as close to the last step before bankruptcy as you can get and despite what some bankruptcy advocates tell you, it is the absolute last resort that should be considered.  All debt resolution programs concentrate on prioritizing your debts and getting a handle on past financial indiscretions.

Which Option Is Right For Me

One of the main differences between counseling and consolidation is the fact that counseling is mostly a passive action in which advice is dispensed and the consumer is left to make the decisions and set into motion the actions necessary to get back in the black. 

While this sounds good in theory, let's face it, people in debt trouble seldom have the fiscal willpower or organizational skills to manage debt resolution programs on their own.  This is generally why they are in the financial situation that they are in to begin with.

In contrast, debt consolidation is a solution that employs experts in the field of debt removal that do the heavy work for you.  All that is required of the client is to provide a monthly lump sum from which your outstanding bills are paid at a pre-determined amount.  Negotiating directly with your creditors, debt consolidation experts arrange easier payment plans with any organizations in which you have outstanding debt.  T

hey are able to do this not only because of their knowledge of money matters but by playing on the creditor's fear that they may never recoup anything from the people that owe them money.  Most debt consolidation firms will make the effort to validate your debts with your creditors to assure that any collections are still active or has not been credited to you by mistake.

Credit Counseling 101

Credit counseling services are excellent sources of information pertaining to debt resolution.  They can provide you with rundowns on a myriad of services that are available to the general public.  They have access to many different calculators and formulas to figure out your current and future financial situation, debt to income ratio, and similar considerations. 

However, most of these tools can be obtained online these days at a variety of sites.  Credit counseling generally revolves around not only paying down debt but also building strict budgetary guidelines that need to be followed if the plan is to be successful.  Again, people in financial straits are not generally very good at sticking to budgets and this proves to be a sticking point for much of the public.

Debt consolidation programs can sometimes negotiate a smaller overall settlement with their client's creditors than would normally be paid.  Many clients experience, even after the appropriate fees are added, repayment at drastically reduced rates and a proportionate savings on their cumulative total, much of these savings are realized in interest rates alone. 

Another solid benefit of debt consolidation is the convenience of dealing with a single creditor instead of having to juggle payments between multiple bill collectors.  When you combine this with the fact that many consolidators have a lower monthly payment than when they had several active accounts.

People who chose credit counseling can find services that are free through the community or local churches.  A good counselor can explain the many different options available to the debtor and offer solutions to their financial hardships in an unbiased and informative manner. 

Giving advice on how to shore up your credit score and make their clients aware of their legal rights, although they cannot dispense legal advice per se, they are an excellent resource for the basics of money management and what lifestyle changes need to be addressed to keep the situation from repeating itself.

Better Options

It should be noted that "debt consolidation" and "debt consolidation loan" are not the same thing.  Although the end result is the same in both occasions, they are two very different processes.  Debt consolidation services contact creditors, create payment plans for their clients, and remain in contact with all parties to assure everything is going smoothly. 

Consolidation agencies conduct all transactions for their customers and monitor all balances due.  A reliable agency can even end any harassing calls from creditors, even though there are laws against this type of telephone practice they are sometimes ignored by collection companies.

Credit counselors are not all free, the more industrious ones work for a fee.  Research any credit counseling or debt consolidation agency before making any decisions on which to go with, there are some that are not completely legit and charge exorbitant rates for little or no work.  Check with the Better Business Bureau and ask for references from former clients. 

Consolidators and counselors operate in a confidential manner and personal information is closely guarded.  Well-established agencies have been in business for a number of years, have some verifiable certification, and support industry standards.  You are not alone when it comes to being in debt; there are literally hundreds of millions of people who have a similar problem.  Counselors are skilled at laying out a plan that is tailored to your situation and advising on the correct procedure to follow. 

The Ease Of Consolidation

It is hard to believe that less than minimum payments can be made in such a fashion that the debt is erased in a fraction of the expected cost and time, but it does happen.  Debt consolidation offers a very viable opportunity to obtain solvency in a timely and relatively inexpensive manner.  Debt consolidation improves your credit rating as quickly as accounts begin to be paid off. 

The majority of people who chose to flee multiple creditors and deal only with a single monthly payment reduce their rates and eliminates late fees through a complete and thorough consolidation program.  Having them arrange an affordable repayment plan can relive an enormous amount of stress from the financially burdened and put them back on the road to monetary stability.