Aug 092012

In the course of our discussions about debt, money management and various personal finance issues, it is clear that there is a need for a brief discussion on different aspects of debt management. In particular, a good distinction should be made between debt consolidation and credit counseling, and ultimately, at least in this article, determine what exactly  the debt consolidation benefits are since there are different ways of dealing with debt problems.

First, it’s helpful to lay out some of the key highlights of a debt consolidation program.

  • Debt consolidation can help save you a lot of money from the principal amount on the debt. The terms differ with each different settlement, but it is possible to have the principal reduced.
  • You can get your credit card paid off within a year or two. This is ideal since you won’t have to carry on this repayment for the next five years or so that sometimes can occur with other types of debt management.
  • You monthly payments are reduced to a level you can manage. You can get a payment that is within your budget so you’re not continually struggling to stay above water.
Now, here are some of the highlights of credit counseling for a comparison.
  • Depending on how much you owe, of course, credit counseling can take several years to finish.
  • You cannot usually pick the amount you can pay each month.
  • You are responsible for all of the principal on your debt as well as interest charges.
  • Usually, the fees associated with credit counseling are lower than with debt consolidation.

Ideally, whatever type of debt management program you choose to pursue, the best action is to fully educate yourself on all of your options and understand the future implications of your decision.

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