Editor's Comments: Debt is a bad thing for you, but your debt is a good thing for the creditor. You debt is their potential profit, which is their sole purpose for their existence. They take the matter seriously, and so should you. You must know that no creditor is going to want you to "dissolve" your debt to them. For this reason, creditors have created a defense agency to "counsel" you and "help" you to pay your debts in full. The creditors pay for this agency's operation. Just be sure you understand that every remedy offered by them is designed first to maximize the return to the creditors. This may not be in your best interest, obviously!

Credit Counseling vs. Debt Consolidation - Which is right for me?
by: Eric Quinn

Debt consolidation and credit counseling are similar services that assist individuals in getting out of debt.

Editor's Comments: The problem with paying your debts through a restructuring plan is that you will further damage your credit, and earn no "kudos" or "good citizen points" because you bent over backwards and paid your debts in full over many years. You may very possibly emerge after 3 - 5 years with completely destroyed credit, but no debt. At that point you will be unable to secure any new credit, except at the highest rates and worst terms. How will that feel to you after you have literally slaved away to pay your debts all these years? Many people have said had they known how it would all work out, they wished they had declared bankruptcy instead.

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.

About The Author Eric Quinn recommends that you visit http://www.incharge.org for more information on credit counseling. ericquin@gmail.com

Editor's Comments: A debt consolidation loan may just be a stop for you just before bankruptcy. Why? Well, let us say that you have ten (10) debts that you have taken out while you have good credit. These loans have a good (relatively) interest rate. Now your credit starts to stink because you are paying late, and you want to consolidate. Any lender who makes a loan to you at this point knows that you are having trouble paying, and will charge you rates ranging from high to exhorbitant. You will probably end up with an awful "Rule of 78 precomputed interest loan". These financial atrocities are the worst thing for any debtor because they have many factors in favor of the credit, including no benefit to you for extra payments made. That's right, if you make double payments let's say, then you will merely be giving the lender all their interest in one-half the time, so they will earn DOUBLE the rate that the papers say. Creditors do the right thing for them, so too, should you do the right thing for you.