With the average American home owing at least $15,000 in credit card debt and over $30,000 in student loan debt, it’s no surprise that the topic of debt consolidation is one that’s attractive for many. While consolidating your debt is among the most effective ways to eliminate this debt, with several options it’s easy to be confused. Before delving into the world of debt consolidation, take a few moments to familiarize yourself with the top ways you can consolidate debt.
Personal Loan Consolidation
The entire concept of consolidating debt is to take multiple avenues of debt and lump them into one single monthly payment. While there are many different ways to accomplish this, taking out a personal loan is among the most popular. While taking out a low-interest loan can save you potentially thousands of dollars over the life of the loan, this form of consolidation is only appropriate for those with decent credit scores. The biggest challenge many consumers face is qualifying for a low-interest loan large enough to cover all other debts. The primary reason for this is if you have a decent amount of debt or if your credit score has been struck down due to late or missed payments (see more examples here).
Credit Counseling Consolidation Service
Although counseling agencies aren’t able to actually consolidate your debt, they do offer DMP, or Debt Management Plans. While these plans do have some disadvantages, such as a negative remark on your credit report, they are an effective way for consumers with bad credit to consolidate their debt. If you’re interested in enrolling in a DMP, then you’ll be basically paying the agency a monthly payment. After a period of time, typically 30 to 60 months, the amount collected is enough to completely pay off all debts. One of the biggest benefits of this form of debt consolidation is its ability to stop creditor and collection calls. While your account may still feature negative remarks, when you’re enrolled in a DMP creditors are aware of your willingness to repay your debts.
In a general sense, attaining a debt management plan from a credit counseling agency is an ideal situation for those who are unable to obtain a personal loan or a credit card consolidation loan due to bad credit, and are unable to repay their debt in a timely fashion by themselves. Therefore, a counseling agency can provide the extra help you need to stay afloat while systematically reducing your debt.