Being in debt causes life to be more stressful and less enjoyable . By the time most people see the error of their ways, they’re already in so much debt that it will take them many years to get out of it. Fortunately, there are options that can help you get your debts paid off more quickly. Here is some borrowing advice to help you.
Two of those options are credit counseling and getting a debt consolidation loan. With credit counseling, a third party negotiates lower payments and interest rates for you. You then start making one monthly payment to the credit counselor, and he forwards the monthly payments to your creditors on your behalf. With a debt consolidation loan, you simply take out a loan, use the proceeds to pay off your existing debts, and then repay the loan.
Either of these approaches can help you repay your debts . Which one is best for you depends on your individual circumstances. Here are some pros and cons of credit counseling versus debt consolidation loans to consider.
Pros
- In addition to negotiating with your creditors, a credit counselor will help you work up a budget . This will help you pay off your debts more quickly and better manage your finances.
- A credit counselor will take your overall financial situation into consideration when negotiating with creditors. That means that you should end up with a monthly payment that is affordable to you. If you get a debt consolidation loan, the payments may or may not be affordable.
- If you get credit counseling you won’t have to take on an additional loan. Getting a debt consolidation loan gives you access to more credit once you pay off existing bills, so if you’re not careful, you could end up with more debt than you were in to start with.
Cons
- When you undergo credit counseling, it is noted on your credit report. You won’t be able to get additional credit until you have repaid your debts in full. That will preclude you from getting deeper in debt, but if you have a legitimate need for credit, you’ll simply be out of luck.
- With the credit counselor making the payments to your creditors, there’s no guarantee that they will be made on time. You could be responsible for late fees if they’re not, even though the delinquency was through no fault of your own.
- Credit counseling isn’t free. There is a fee tacked onto each monthly payment that goes to the credit counseling agency. Usually this fee is reasonable, but it’s important to know precisely how much you’re paying for the service.
Credit counseling and debt consolidation are both viable options for those who are in too much debt. But either way you go, it’s important to cautiously consider your options and carefully review any agency or lender you opt to work with. Doing so will help ensure that you make the right choice and don’t get burned.
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