Debt Reduction Program: Debt Consolidation

Debt Consolidation

Debt consolidation is one among many debt reduction programs available to someone needing help to become debt free. Debt consolidation is a term generally used to describe debt repayment plans which may include debt management plans and debt settlement plans. Other debt settlement companies use different terms for these debt reduction programs but they are all basically the same, each with slightly different features, just different names. These plans allow you to combine your monthly payments to your creditors into one monthly payment combined with lower interest rates and other creditor benefits. All of these plans are designed to get you out of debt as quickly as possible.

The best plan for you?

Which plan will work best for you depends on your situation, the kinds of debts you have, your income and ability to pay and what you believe and agree to what is affordable for you. A debt counselor will help you through the process of selecting which plan will work best for you. Some companies have online guides to help you select options to help you understand and learn how these debt reduction programs work.

Debt Management Plans

A debt management plan is a mutual agreement between you and a credit counseling company in which you agree to repay all of your unsecured debts in full over time, without taking any more debt. With a debt management plan, most if not all of your creditors will agree to substantially reduce your interest rates. Future fees for late payments and over the limit penalties can also be avoided with this debt reduction program which can bring your account into current status.

Debt Settlement Plans

If you can not afford to pay your debts in full, debt settlement services could be your alternative to bankruptcy. A debt settlement services option will allow you to pay your debts in part. On a debt settlement service agreement, your monthly payments are typically held in a protected account and your provider works to negotiate with your creditors for a less-than-full repayment.
Over time, this allows deals to be made with each of your creditors separately and allows you to become debt free usually in 3-5 years.

During the time on a debt settlement service agreement, creditors may choose to continue collection activities, including judgments, lawsuits, and wage garnishment. It is important to consider these risks when choosing a debt settlement service.

Reminder

In my next post, I will discuss the pros and cons of each of these alternatives. Also, remember that any of these alternatives will work only if you follow the program as it is designed and to be completely successful, you have to learn and live the correct principles of debt free living.

Live life to the fullest!