Debt Consolidation Vs. Credit Counseling
Debt consolidation and credit counseling are just two of many options availabe for those who need help managing their debt. If you're seeking a debt solution, consider the pros and cons of each.
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Definition
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Debt consolidation refers to combining debts into a single monthly payment to save money on interest and fees. Credit counseling refers to a group of services involving money and debt management.
How It Works -- Debt Consolidation
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Secured and unsecured debts are combined into a consolidation loan, or through the services of a debt consolidation company.
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How It Works -- Credit Counseling
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You meet with a certified credit counselor who goes over your expenses and income. If you qualify, the counselor works with you and your creditors to create a debt management plan.
Pros and Cons - Debt Consolidation
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Debt consolidation allows you to make a single payment each month at a lower interest rate. If you consolidate unsecured debt into a secured loan, you run the risk of losing your collateral if you can't make the payments.
Pros and Cons -- Credit Counseling
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Credit counseling helps you stabilize your payments and lower your interest rates. It can also lower your credit score if your debt management plan requires that your accounts be closed.
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