Credit Counseling vs. Debt Consolidation: Which Is Better for You?

When you are facing debt, you might feel considerable uncertainty and confusion. We hope that this article will help you decide which of the two possibilities–credit counseling or debt consolidation–is right for you and your situation.  

Credit Counseling: What It Is and How It Works

During credit counseling, you will speak with a certified credit counselor, discuss your finances, and then look at various options for paying off your debt. A credit counselor will help you acquire a broad, objective overview of your financial situation and a better understanding of the consequences of each debt-payoff option. 

Budgeting Debt management  Debt consolidation  Debt settlement  Bankruptcy

After a thorough analysis of your financial situation, the credit counselor will suggest several possible solutions. Depending on your individual case, these may be: 

Debt Consolidation: What It Is and How It Works

Debt consolidation means taking a large loan and putting it towards paying any smaller debts you may have. When done right, this can minimize the number of payments you make each month, enable you to focus on paying off a single loan, and reduce the amount of interest you pay. 

People commonly use two options for debt consolidation:  

A personal loan, which you would typically need to repay within one-to-seven years, may seem daunting, but with a fixed time frame, paying off debt will usually be more effective than with a revolving credit line that requires minimum monthly payments. A credit card that offers a promotional 0% APR (annual percentage rate) on balance transfers gives you a chance to repay your debt with zero interest.

Credit Counseling vs. Debt Consolidation: Which Should I Choose?

Both debt consolidation and debt management via a certified credit counselor are practical, time-proven ways to get out of debt. 

Sometimes You Need Both

In some cases, credit counseling and debt consolidation will go hand in hand–you might need credit counseling to realize that debt consolidation is the best option for you. 

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