Debt Consolidation and Credit Counseling

No matter what your occupation, your status in life, or what your belief system is – in our money-driven society almost all of us are familiar with debt. There are bills to be paid, groceries to be bought, taxes that go to the government, and a plethora of other obligations that must be met each month. It doesn’t matter what your walk in life is, debt is simply a reality in today’s world.  Where the problem comes is when that debt becomes too much.

For any one of us, a number of situations may make our debts become a problem. When that happens though, it’s important to know that you aren’t necessarily stuck. Bankruptcy isn’t the only option. Understanding that, knowing that you can turn to debt consolidation and credit counseling can relieve a large part of the burden when debt is a problem.

To take it further though, it’s important to understand the differences between debt consolidation and credit counseling, and to be able to choose the solution that’s right for you.

Debt Consolidation and Credit Counseling – What’s the Difference?

There are obvious differences between debt consolidation and credit counseling. Consolidation entails taking out a loan, while credit counseling involves working with a debt counselor to negotiate down the amount of money you owe. There are also less obvious, and often misunderstood, differences between the two.

1. Differences in length of time to complete – One of the biggest differences is the length of time to complete the program. A consolidation loan usually averages 5 – 8 years before it’s paid off. On the other hand credit counseling, often referred to as debt settlement, is usually completed in 2 – 3 years.
2. Differences in the way your credit is affected – One of the most misunderstood differences between debt consolidation and credit counseling is the way in which your credit rating is affected. People seem to think that because consolidation is a loan that it affects their credit in a positive way. This isn’t true at all.

A consolidation loan is a black mark on your credit rating. Most lenders look at your current credit, see that you overextended yourself, and will refuse to extend further credit. This black mark lasts for the length of time the consolidation loan is on your credit rating, and five years after. Since a debt consolidation program can last as long as 8 years, that’s 13 years that the loan may affect your ability to gain credit.

Since a debt settlement program is over faster, the negative effect to your credit rating doesn’t last as long. If you finish your debt settlement in 2 years, then at that point you can begin working to rebuild your credit and overcome any negative effects the counseling program may have had.

These differences are important to consider as you choose the debt relief program that is right for you.

Debt Consolidation and Credit Counseling – Which one’s Right for Me?

With a clear understanding of the differences between debt consolidation and credit counseling choosing a solution isn’t really that difficult. The only other thing you really need to consider is the amount of debt you have.

If your debts are still a manageable amount, and are under $10,000, then a consolidation loan may be the best solution. The important thing here is that you are able to pay the loan off in a 2 – 3 year period. This obviously becomes less likely as you begin dealing with larger amounts of debt (most of us couldn’t pay off a $100,000 loan in 3 years).

For those with a larger amount of debt, a credit counseling program is likely the best solution. By working with a counselor and having the balances of the debts themselves reduced – your debts become more manageable and you’ll be able to complete the program in a shorter amount of time.

If you’re currently suffering because of huge debts, you may want to check out our debt relief review page. We cover the top 3 debt relief companies in the US according to our research and consumer feedback.

Consumer Credit Counseling Programs

One question that comes up often when talking about debt relief and debt settlement is consumer credit counseling programs. The idea of credit counseling is often misconstrued, misunderstood, and mistrusted for all of the wrong reasons. From that, we wanted to take some time to talk about credit counseling.

In this article we will cover what consumer credit counseling is, the various forms it may take, and we’ll help you to get rid of some misconceptions you may have had about credit counseling in general.

Consumer Credit Counseling – Definition and History

The first thing we need to cover is what consumer credit counseling is. In general it is a process offering education to consumers about how to avoid incurring debts that cannot be repaid.

The process itself actually entails more than educations, and usually credit counseling often involves negotiating with creditors to establish settlements on existing debts. The concept of credit counseling was established in the 1980’s as was proposed created as an alternative to bankruptcy for consumers who could not meet their monthly obligations.

In the early 1990’s credit counseling began to get a bad rap in the U.S. At the time credit counseling agencies were springing up all over the place, and some of them actually worked more for creditors rather than consumers.  This led to an antitrust lawsuit against the National Foundation for Credit Counseling, or NFCC, and the need for better legislation led to some of the associations that manage debt negotiations today. It also led the FTC (Federal Trade Commission) to file lawsuits against several credit counseling agencies.

This bad reputation is what makes some people cringe at the thought of credit counseling today. However the reputation is mostly undeserved. Â In the world of consumer credit counseling today, the various associations that regulate debt negotiations have led to better debt settlement agencies.

Consumer Credit Counseling Programs

Consumer credit counseling programs provide a viable, and better, alternative to bankruptcy. But, and yes there is a but, the FTC still recommends that you research the company who you use for credit counseling services.

This is actually one of the reasons why we started this site, and why we take the time to share information with you on debt relief. Our reviews of the top three debt relief companies, provide you with three companies that can help you choose the right consumer credit counseling program, and who will work for you to get the best results possible (and relieve your debts faster).

Credit Card Debt Relief Program – Know Your Options

For those who have a larger amount of debt, finding relief from those monthly payments is often a priority. The problem is that a good credit card debt relief program can be hard to find. The credit card companies are calling, the collection agency has threatened to sue, and your biggest wish at the moment is to find a debt relief program that actually works.

There are many reasons that debt can become a problem. Illness in the family, sudden (unexpected) financial obligations, a spouse losing their job, or even just poor money management may have got you to this point. It really doesn’t matter what got you here, what you need to know right now though, is that there are options that can help.

In fact, with the right credit card debt relief program, you can be back on your feet in a short amount of time. Let’s take a moment to discuss your options, and help get you on the road to debt relief.

Credit Card Debt Relief Program Options

When it comes to relieving credit card debt quickly, there are really three options available to you (actually four, but ignoring the problem is a bad idea so we won’t cover that).  The options are as follows:

1. Declare Bankruptcy
2. Get a Consolidation Loan
3. Talk to a Credit Counselor and take Part in a Debt Settlement Program.

Each option has its downside, so let’s talk about each one individually for a moment.

As a solution to debt relief, bankruptcy is usually the worst option. Bankruptcy does work to get rid of your debt, but it will also follow you for the rest of your life. It’s not just your credit rating that is affected for 5-8 years, as most people think. It’s also obtaining any type of credit whatsoever. Even a bank account application asks “Have you ever declared bankruptcy?”, and it’s a question that you’re legally obligate to answer. For this reason, bankruptcy should only be considered if the next two options aren’t suitable.

Next on the list we have consolidation. With this type of solution you take out one large loan, with a smaller payment than the others combined, to cover all of your debts. This type of solution may seem like a viable option but there is one major problem.

Consolidation loans can last for 6 or 7 years. Suddenly instead of relieving the problem, you’ve only made it a little less hard on your pocket book for now. Maybe you can meet the new payment monthly, but you’ll be forced to do so for years to come. Consolidation loans are really only a good option if you have a smaller amount of debt to contend with (say under $10,000) and you can pay the loan off in a reasonable amount of time.

Finally we have the last option which is debt settlement, also known as credit counseling, as a credit card debt relief program this is usually the best option. With this type of solution a debt negotiator works with all of your unsecured debts (not just the credit card companies) and negotiates a lower balance on the amount owing.

The upside to this type of program is that it is usually over quickly.  With the reduced balances, a debt settlement program can usually be finished in 2 – 3 years. That’s half the time the consolidation loan would have taken, and it doesn’t affect your credit rating like a bankruptcy would. The downside to debt settlement is that you have to have over $10,000 in unsecured debt to qualify for the program.

If you are currently burdened by a large amount of debt, there are options. You can get help finding a credit card debt relief program on our home page: Top 3 Debt Relief Companies Reviewed

Credit Card Debt Relief Program – Choosing a Company to Work for You

When it comes to choosing a credit card debt relief program many people find the idea intimidating. There are so many different companies, and all of them state that they have the best solution to relieving credit card debt. Choosing which company you decide to put to work for you is important to getting fast debt relief.

Let’s face it, for those of us who understand how much debt can be a burden, relieving that debt becomes even more important. Debt can affect your family, your relationships, your lifestyle, and even your ability to live in our money driven world.

It doesn’t really matter what the cause of the issue is. Maybe you lost your job and suddenly can’t keep up, or maybe you simply had bad spending habits. In any case, choosing the right credit card debt relief program can make all of the difference in determining how quickly you can get back on your feet.

Credit Card Debt Relief Program – Do You Need One?

The first question you need to ask yourself is do you need a credit card debt relief program in the first place?

First of all there are laws in place (in most states) that disallow you from taking part in a debt settlement program if you have less than $10,000 in unsecured debt. For those with under $10,000 in debt, there are other options such as a consolidation loan. If you do have more than $10k in unsecured debts, then a debt relief program such as a debt settlement is a viable answer.

With this type of credit card debt relief program you work with a credit counselor, and they work to negotiate the total balances due on your debt. Any type of debt that isn’t secured can be worked into the program, and as the balance owing is negotiated down, so are the payments. In some case this can reduce you’re the amount you need to pay monthly by as much as 90%

Credit Card Debt Relief Program – Which Company to Choose

If you decide that a debt settlement program is for you, then the next question to answer is which company do you choose?

From our consumer reviews of the various debt relief programs, we highly recommend Curadebt as the #1 debt settlement company. If for some reason that particular debt company doesn’t fit your needs, you can read about all of the top three debt relief programs here.

Debt Consolidation Not For Profit?

From our contact page the other day we were asked if we could recommend a nonprofit debt consolidation company. The short answer to the question is that there is no such thing as debt consolidation not for profit.

Of course there are companies out there that might call themselves non-profit debt relief companies. These companies may offer a range of services from consolidation loans to debt settlement, or even bankruptcy services. The problem is that they may call themselves non-profit companies, but most likely you’re being misled.

When it comes to debt consolidation specifically there are really two types of companies out there. There are those who lend you their own money and those who borrow money from others and relend it to you. In either case there is interest charged on the supposed nonprofit consolidation loan that you take out, and fees are usually charged for acquiring the loan itself. Herein, of course, lays the problem.

The consolidation company calls itself non-profit, but they still collect interest on the loan, and they do profit from that interest. In many cases they pay out huge salaries to the directors of the company so that can maintain their non-profit status.

The qualifications to become a nonprofit organization in the US aren’t really that strict. Basically all you need to do to get nonprofit status is create a company that doesn’t specifically earn money (it was created as a corporation, but not intended to profit as a corporation). That’s not to say that they can’t spend a huge amount of money on expenses.

In other words, the term nonprofit, when it refers to debt companies is usually just a marketing gimmick. Â The same can be said about nonprofit debt negotiators, and most other offshoots in the debt industry. Â The companies are still going to earn money for their services; they just hide that money by paying it out to someone else.

Debt Consolidation Not For Profit – A Better Solution

With a brief look at what debt consolidation not for profit really means (not much at all), it’s time to talk about a better solution. Since your goal of a consolidation loan, or a debt relief program, is to get out of debt – a much better option to being misled by a company who calls themselves nonprofit is to find an experienced debt relief company. On the front page of our site you’ll find consumer-backed reviews of the top three debt relief companies in the US.