Will Using A Debt Consolidation, Credit Counseling Or Debt Negotiation Firm Help You Get Out Of Debt Faster?
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A little knowledge now could save you time, money, stress and aggravation down the road.
First of all, I know that you are in debt and likely very stressed about it, or let's face it, you wouldn't even be reading this article. But let me assure you that by seeking help with your debt situation, and better yet, educating yourself about your options,
you have taken the first vital step towards eliminating your debts and the stresses that they bring.
So congratulations, you are already ahead of the game.
Now, where to turn for help.
Many people just like you feel preyed upon by the myriad of 'debt help companies' that are out there proclaiming that they can help you with your debt situation. The question is, can these debt consolidation, credit counseling and/or debt negotiation companies really help you, or are they just out to take advantage of your delicate situation?
A good starting place is to take a closer look at exactly how these debt elimination services really work, learn the differences between the services and decipher all of the promises that they make.
Are debt consolidation, credit counseling and debt negotiation all the same thing?
Let's take a look at each.
1. Debt Consolidation:
There is a common misconception that debt consolidation programs involve the consolidating of your debts which is just not true. What is consolidated is your payments, allowing you to make just one payment each month to the debt consolidation firm that is handling your account. This company would then turn around and pay each of your creditors on your behalf.
But let's back up just a bit and take a bigger picture view of debt consolidation programs, how they work, and the pros and cons.
What exactly do debt consolidation companies do for you? When you sign up for a debt consolidation program, you are assigned a debt counselor that works closely with you and your creditors. One of the first things that will happen is that all of your creditors will be contacted and made aware that you are working with a debt consolidation - credit counseling company. Your creditors will be advised that all future contact regarding your accounts is to be directed to your debt counselor, not you. This alone should take a huge amount of stress off of you. No more dealing with angry creditors and wincing when the phone rings wondering if it is someone calling to collect a debt.
The next thing that will likely happen is that the debt consolidation - credit counseling company will begin negotiating with your creditors to lower your interest rates, remove late fees from your accounts and arrive at a monthly payment that will fit your budget.
Debt consolidators can often get your creditors to reduce interest rates by 50%, and sometimes by 100%. In other words you would not be paying any interest, and all of your payments would go directly towards paying down your debt. Now, the truth is that most major credit card companies have set interest rates that they will offer to customers who are working with debt consolidation, credit counseling and debt management companies. For example, Bank of America eliminates all interest charges for consumers who are working with debt consolidators. Yes, a 100% reduction. On the flip side there are creditors that will not reduce interest rates at all. Bottom line? It varies from creditor to creditor. But overall, a good debt consolidation - credit counseling firm can dramatically reduce the amount of interest you are paying every month.
It is important to keep in mind that all debt consolidators are not the same. Like any industry there are good and bad companies out there. One company that we like to recommend to our visitors works in association with a non profit organization and offers a free debt plan with no obligations on your part. They handle debt consolidation, credit counseling and debt negotiation so they will be able to advise you in all three areas. (We will talk further about credit counseling and debt negotiation below.) You can visit there site here and receive your free debt plan.
2. Credit Counseling
An important part of any debt help program should be to ensure that you receive the proper education and information to help you avoid the same debt problems that you are facing now, in the future.
This is where the credit counseling part of a debt consolidation - credit counseling program comes in. You probably noticed that in the explanation of debt consolidators in the above section, the term credit counseling was also used. The fact is that most debt consolidation services offer credit counseling as part of their debt management program. This is why the terms debt consolidation and credit counseling are often used to describe the same program.
However, unlike the debt consolidation portion of the program which deals mainly with your creditors, the credit counseling portion deals mainly with you.
A credit counselor will work with you to help you manage your money, find solutions to your current financial problems and develop a personal plan for the future so that you can avoid similar debt problems in the future.
Finally, the reason that most debt consolidation - credit counseling companies offer credit counseling as part of their debt help service is due to the fact that they have to. You see, in order for many of these companies to qualify for their non profit status for tax purposes, they must offer credit counseling to their customers as part of the debt consolidation process.
Another superior service that we have been recommending to our visitors can be found here.
This service offers a free no obligation debt analysis, and following that they will match you up with a debt consolidation - credit counseling service that will be most appropriate to meet your needs.
3. Debt Negotiation
Debt negotiation (also called debt settlement or debt elimination) is quite different from debt consolidation - credit counseling.
You will remember that a debt consolidation program doesn't reduce the actual amount of debt that you owe, but it will reduce the interest payments on your debt.
A good debt consolidation program on the other hand, can cut the actual amount of debt that you owe by 50 to 89%. For example, if you owed $20,000, it may be possible to settle your debts for anywhere from $4,000 to $10,000. (To see actual sample debt negotiation letters where consumers have eliminated up to 89% of their debts click here - debt reduction services sample letters.
When you begin working with a debt negotiation service, you will stop making all payments to your creditors (if you have not stopped already) and the debt negotiator will begin to negotiate a one time cash settlement with your creditors. The basic premise is that your creditors would rather settle for a portion of the debt than nothing at all, which is what they would get were you to declare bankruptcy.
Debt negotiation is really a last resort to avoid bankruptcy (which usually you should try to do at all costs!) can be very detrimental to your credit rating during the process, and as you can see differs quite significantly from the debt consolidation - credit counseling approach we discussed above. For a more in-depth discussion on debt negotiation click here.
If
you think that debt
negotiation may be an option for you, or if you would like a free
debt plan prepared for you, here is a link
to the debt negotiation
company that we recommend to our visitors.
Also, if you are
interested in a free report called "The
shocking secrets of how and when to use debt negotiation"
you
can receive one by clicking
here.
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consolidation, credit counseling and
debt negotiation services has been helpful. Please feel free to
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