Credit Counseling Options
Many residents in North Carolina as well as in other parts of America need debt relief from their high-interest credit cards and other types of unsecured debts, such as department store charges, medical bills, gas charges, or even unsecured personal loans. If you are also struggling with credit card debt, there is good news. These days, you have several debt relief methods to choose from - including debt consolidation through credit counseling, debt settlement, or a debt consolidation loan.
Debt consolidation, or sometimes referred to as a debt management plan (DMP), typically involves combining or "consolidating" your high-interest credit card debts into one, more affordable, and more manageable monthly payment that is made to a credit counseling agency to be distributed to individual creditors. Debt settlement, on the other hand, is a process where you hope to settle, or negotiate, with creditors a significantly reduced debt amount. Finally, with a debt consolidation loan, you are typically combining your high-interest credit card debts into one, lower interest personal loan.
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How Can Debt Consolidation Help You?
As noted earlier, debt consolidation typically involves combining multiple credit card debts into a single, more manageable monthly payment that consumers make to a credit counseling agency. If you may be considering enrolling in a debt consolidation program, here's what you can normally expect:
A credit counselor will assess your finances, debt amounts, and your ability to handle those debts. After your credit counselor has a clear picture of your debt situation and has all the financial information they need, he or she will develop a strategy that may help you reduce your debt amounts. Typically, your credit counselor will speak to creditors, on your behalf, submitting proposals asking for lower interest rates, or waiving or eliminating any late fees - generally for more affordable repayment terms.
Creditors that accept the proposals are normally placed into a debt management plan. With a single, more affordable, and more structured payment plan in place, you can, hopefully, direct more of your payments towards paying off the principal of your debts versus just the interest. In many cases, debt consolidation can typically help you reduce your debts sooner than if you only continued to make your monthly minimum payments at higher interest rates.
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Another viable debt relief option is a process known as debt settlement. As previously mentioned, with debt settlement, you are hoping to settle with your creditors for substantially less than what you owed. Debt settlement is fundamentally different from debt consolidation in this manner: With credit counseling, you are typically paying back the entire amount of your debts, just at a lower interest rate and with a more structured payment plan. With debt settlement, you are typically not paying back all that you owe; instead, you are hoping to "settle" or negotiate with your individual creditors for significantly less than your actual debt amount.
As it is with any debt relief method (including credit counseling), it's important to know the potential risks involved. With debt settlement, consumers are typically advised to stop paying their credit card bills to accumulate funds over time that they can use to make a reasonable settlement offer to their creditors. In many cases, credit card companies may threaten to sue consumers for defaulting on the terms of their credit card agreements which will typically result in a decline in their credit scores.
Despite these risks, for many consumers, debt settlement remains a popular alternative to bankruptcy which can have a more damaging and longer lasting impact on personal credit.
The bottom line is, there are a variety of debt relief options available for North Carolinian consumers like you who are struggling with debts. Whether you choose debt consolidation through credit counseling, or debt settlement, it is smart to do your due diligence, thoroughly research potential companies, and understand the pros and cons of your debt relief options.
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