Debt Management Plans vs Debt Consolidation
Debt Management Plans require you to make regular, monthly payments over a 2 year period or longer, directly to the Consumer Credit Counseling service that you have chosen to work with. They will take your deposit and pay down your unsecured debt (including: credit card debt, student loans, and medical bills) according to whatever payment schedule has been arranged between you and your creditors. The consumer credit counseling service may also be able to negotiate lower interest rates or get certain fees waived for you if your situation warrants those kinds of concessions. The main thing to remember is that if a debt management plan is the right course for you, finding a good consumer credit counseling service will help you learn how to stick to a budget and develop long term money management skills.
Debt Consolidation is typically an option to combine your unsecured debt (debt not linked to any assets) into one single monthly payment. Basically, it means combining several loans (or credit card debt) into one larger loan. This is done to secure a lower interest rate and simplify the repayment terms. Be mindful of the fact that you need to have a good/high credit rating to get a worthwhile promotional interest rate to warrant debt consolidation. Essentially you are opening a new line of credit. If you own your own home, refinancing to use potential equity to open a new line of credit and to pay down your credit card debt may seem like the best way to go. However, look at this option carefully. Is your home worth more than you owe on it? Will you end up paying more interest over time if you choose debt consolidation? Talking with a consumer credit counseling service should provide you with a personalized plan that will help you make these important decisions.
At SmartQuote.com, learn about Consumer Credit Counseling Services & find out what your Debt Consolidation Options are.