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1. Counseling - Debt Consolidation Services (advice and guidance only).
A free service option or negligible cost debt consolidation service designed to help solve debt problems yourself. Involves the review of your personal financial data (principally debt/s and expenditures) by a debt consolidation service counselor, the goal of which is to recommend action. Provided face-to-face, by telephone, email or online debt consolidation services.
Considered to be an essential starting point before any choice over debt consolidation services or non-consolidation action is taken. Counselors may recommend option 2., 3., 4. or a non-consolidation alternative. Often steers to 3. Plan/Program. Why? Read up here.
2. Loan - Debt Consolidation Services
Pay two or more debts off immediately, by consolidating them into one new loan having more favorable terms. Consolidation of debts and creditors. (Pay off one debt/creditor only - "refinance".)
3. Plan/Program - Debt Consolidation Services
Ongoing repayments, now managed on your behalf. Consolidation of payments. No consolidation of debts and creditors, all of which remain until the plan is complete. Designed to reduce the interest burden only. 3-5 years to pay off through a debt consolidation service is typical.
4. Settlement - Debt Consolidation Services
Ongoing payments into a fund. Consolidation of payments. No consolidation of debts/creditors, all of which remain until accounts are settled. Designed to reduce interest and the principal amount owed. This debt consolidation service may go on for months.
Providers Of Debt Consolidation Services
1. Counseling: Multiple agencies (non-profits), private professionals and for-profit debt consolidation service providers.
2. Loan: Multiple lenders outside of the industry including banks, credit unions and finance companies (do it yourself) plus industry debt consolidation service lenders.
3. Plan/Program: Not for profit credit counseling agencies. For and "not for profit debt consolidation services". Law firm, private for profits and do it yourself.
4. Settlement: For and "not for profit debt consolidation services". Law firm and theoretically do it yourself.
Debt Consolidation Service Pitfalls
For issues relating to the actual types of service read up on our separate pages.
1. Counseling: Conflict of interest steering towards Plan/Program. Not truly highlighting all possible options. Requires self-help commitment.
2. Loan: Aggressive or predatory lending.
3. Plan/Program: Unscrupulous debt consolidation service providers (amongst genuine and worthy).
4. Settlement: Unscrupulous, fraudulent and scam operators (amongst genuine and worthy).
# Universal: Not adjusting your own fiscal behavior in addition to taking action through debt consolidation services.
When To Use Debt Consolidation Services
- The interest rate that you are paying on borrowed money and disorganization across creditor accounts means that you are wasting money that could be paying down more debt. Hence you are mismanaging.
- You have received counseling (non profit debt consolidation service), considered all options / alternatives for Debt and Consolidation carefully and decided on action.
- You are not willing, skilled or have the option to do it yourself.
- You have ongoing stability in your current job (income) - as best can be anticipated.
- You have read up about the types of debt consolidation services and about the type of companies operating. You understand the risks and implications as well as the benefits.
- You have carefully researched providers according to the chosen type of debt consolidation service. You know what to look for and watch out for.
- You are committed. Not just to the use of a debt consolidation service - but also committed to making necessary changes in your budget and spending patterns.
Credit Card Debt Consolidation Services
The options for dealing with the problem of debt spread over credit cards are the same. You do not need to seek out any kind of specialized credit card debt consolidation services. This type of unsecured debt can be handled through all the types of debt consolidation services listed above. Free debt consolidation services take the form of counseling only, from various non-profit agencies. In practice the only free debt consolidation services can be advice, guidance, information and resources for self-help. Whenever you enlist the help of a debt consolidation service other than counseling there will be some charge involved. With settlement, the fees and risk is normally higher than a plan, although the benefits can be greater. The settlement type of debt consolidation service is argued to be the most risky for reasons including an abundance of bad operators. With proper research into settlement type debt consolidation service providers one may dispense with this risk aspect. To target the best debt consolidation services one must first be clear on what type/method is to be pursued. Our free debt consolidation service provides explanations and further resources.