Debt consolidation and credit counseling are just two of many options availabe for those who need help managing their debt. If you're seeking a debt solution, consider the pros and cons of each.
Definition
Debt consolidation refers to combining debts into a single monthly payment to save money on interest and fees. Credit counseling refers to a group of services involving money and debt management.
How It Works -- Debt Consolidation
Secured and unsecured debts are combined into a consolidation loan, or through the services of a debt consolidation company.
How It Works -- Credit Counseling
You meet with a certified credit counselor who goes over your expenses and income. If you qualify, the counselor works with you and your creditors to create a debt management plan.
Pros and Cons - Debt Consolidation
Debt consolidation allows you to make a single payment each month at a lower interest rate. If you consolidate unsecured debt into a secured loan, you run the risk of losing your collateral if you can't make the payments.
Pros and Cons -- Credit Counseling
Credit counseling helps you stabilize your payments and lower your interest rates. It can also lower your credit score if your debt management plan requires that your accounts be closed.
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