Difference between credit counseling and debt consolidation

As you navigate the path to sound financial footing, you may uncover many options to assist you with your goals. Whether you are looking to become debt free, raise your credit score, or begin better spending habits, you may come across credit counseling companies as well as debt consolidation firms who offer to help you. Understanding the difference between the two will assist you in deciding which options may work best for you.

The Basics of Credit Counseling

Credit Counseling is typically offered by a not-for-profit organization that provides mentoring, education, and guidance in matters of credit and finance. They assist people who need it with finding solutions to overwhelming debt. Credit counseling can help those who have difficulty with debt, creditors, budgeting, and spending. It provides a basis for learning about sound financial habits, building a savings fund, controlling spending, reducing debt through better practices, and other practical solutions. Credit counseling can be an exceptional help for first time homebuyers who are interested in improving their credit to make their first home purchase.

Debt Consolidation Facts

When consumer debt becomes unmanageable and there are many different open accounts with very high balances, debt consolidation becomes an option to consider. A debt consolidation company pays off the debt with one loan leaving one monthly payment to be made. For this service, the debtor will need to pay a fee as well as making their monthly payments on time. Debt consolidation programs can last from 3 to 5 years and at the end of this time, the debt will have been repaid.

The Benefits

Both credit counseling and debt consolidation are invaluable tools for the consumer seeking a way out of debt. Utilizing both of these services ensures a return to financial stability that may take longer without these services. As with anything, it is important to do adequate research prior to working with either a debt consolidation company or a credit counseling agency. Proprietary and sensitive information such as date of birth, social security number, and other identifying facts will be disclosed during communication with the company. For this reason, it is advisable to check with the State Attorney General, and Better Business Bureau before agreeing to work with any particular organization.

Ultimately including these services as you work towards becoming debt free will ensure your success. Take the time to find a reputable debt consolidation and credit counseling company and you will watch as your credit score increases, your debts fall away, and you gain complete peace of mind.