Debt Consolidation And Settlement Come With Pluses And Minuses |

If you’re struggling with debt, you have a choice: Should you work with credit counseling companies, take out a debt consolidation loan or sign up with a debt settlement company? Each option comes with its own pluses and minuses, and deciphering them all can be quite challenging. Fortunately, the website of Fox Business recently ran an informative story from, which provided an in-depth look at the many forms of debt management available to consumers. Which form is best? Not surprisingly, there is no one right answer. It all depends on your financial situation and goals.

Debt Consolidation

The story rightly sums up debt consolidation loans as a safety net of sorts for consumers whose debt has grown out of control. If you’re lying awake at night worrying about your credit-card bills, or if collection agencies are calling you every day, you might be a candidate for debt consolidation. These loans funnel all of your outstanding debts into one loan, with a monthly payment that you can afford. While you’re making your payment, collection agencies will no longer be harassing you. There are some drawbacks, though; for one, taking out debt consolidation loans will lower your credit score. Secondly, these loans often come with high interest rates. You’ll end up paying more than your total debt by the time you finish paying off a debt consolidation loan.

Debt Settlement

You can look at debt settlement as one step higher than debt consolidation. These companies promise to shave large chunks off your debt by negotiating settlements with your creditors. You, of course, pay them a fee for this service. Debt settlement can be an option for consumers whose debt levels are so high that they can’t ever envision paying them off. The problems with debt settlement are pretty significant, though: Working with debt settlement companies looks terrible on your credit report. And the fees these companies charge can be pricey.

Credit Counseling

Credit counseling might be a must no matter which debt management option you choose. Counselors can help you change your negative spending habits. This is important; if you don’t do this, the odds are good that you’ll simply run up your debt once again, playing havoc with your credit score. Make sure, though, when you work with a credit counseling service that it’s a non-profit one. Some of these won’t charge you any fees. But if you do work with a counselor who does charge, make sure that the fees are reasonable. Debt consolidation loans, debt settlement and credit counseling are all options for people struggling with debt. Which one works best for you depends on the amount of your debt.