The Debt Management, Consolidation Credit Card Tug Of War
Owing to a significant number of consumers tethered to credit card debts, debt management and consolidation of credit cards have become a lucrative business for many debt solutions companies. Some debt relief providers lead clients down the debt management route, others escort them towards the debt consolidation direction, while others provide both services to help strained borrowers to come out of the financial tight spot and veer them away from bankruptcy.
Choosing Between Debt Management and Consolidation For Your Credit Card Debts
On the one hand is debt management where a credit counselor will assist you in plotting a sound repayment schedule based on your monthly income and expenses. Guided by this plan, you send a single payment to the debt management company instead of to each of your creditors. It is then the responsibility of the company to distribute the payments to your creditors. Watch out for debt management agencies that do not send your payment to your creditors.
If your debts are at a moderate level and you want to pay them off over a length of time then debt management may be appropriate for you. Another important duty of your debt management agency is to negotiate for better terms with your creditors on your behalf.
On the other hand is debt consolidation where you obtain a substantial loan to simultaneously square up all your debts and then you plan on how you pay back the single loan you have just taken on. Rather than puzzling over how much to pay each of your credit card accounts, paying for only one creditor per month makes it convenient and uncomplicated for you. You must take note, however, that the important thing in debt consolidation is not the convenience in making only a single payment but the lower interest rate you can avail of. When taking a consolidation loan, make sure that the new interest rate you would be servicing is less than the average of the rates of all your credit card accounts.
If your debts have substantially climbed up and you are juggling to pay for several creditors, debt consolidation may work for you provided that your credit standing is still, well, standing. If your credit score is lying flat on its face, this route may cost you a lot. Creditors reward good credit scores with lower interest rates while anemic scores merit exorbitant rates. With a very nasty credit score, some creditors may even disapprove your application for a loan. If your credit score has already been injured, you may still secure a low-interest loan by using your home or other assets as collateral. When you do this, you must resolutely make payments each month, otherwise you may lose the roof above your head.
The Verdict : Debt Management Versus Consolidation of Credit Card Debts
By now you may have realized that both measures are no silver bullets to your credit card burden. They take years of making unfaltering payments. Shop around for great deals and rates and seek advice from experts for your specific circumstance.