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Debt Consolidation Services

Debt Consolidation Services
Anthony Garcia
UpdatedNov 24, 2022
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    3 min read
Key Takeaways:
  • There are 3 main debt consolidation services.
  • Start by looking at your own debt consolidation needs.
  • Look at what you can afford monthly, and choose the debt consolidation program that meets your budget.

Debt Consolidation Services That Can Help Solve Debt Problems

evaluate your options for debt consolidation services

debt consolidation services can help you consolidate your varying debt into one manageable payment and even establish a payment schedule for you and your creditors. typically, debt consolidation services such as credit counseling or debt settlement are alternative debt help options, in contrast to a debt consolidation loan or borrowing to pay off debt.

when you evaluate what debt consolidation service is right for your own personal needs, start by looking in the mirror. what are your goals? where are you today?

if you own a home and if you have good credit, then the best way to consolidate your debts is not through a debt consolidation service but instead it is probably through a traditional debt consolidation refinance loan. if you want to see if you qualify and what type of refinance loan that you can get, then apply with one of our pre-screened mortgage lenders here: apply for a refinance loan quote

however, if you struggle and cannot keep up with your payments then check out credit counseling or debt settlement services, which help you deal with pressing debt problems. you can compare these two debt consolidation services by reading our new debt whitepaper, or read on below.

credit counseling

a common option to consider is a consumer credit counseling service, or cccs. cccs companies offer numerous services, such as financial counseling and budget planning, as well as debt management plans (dmps). in a dmp, the cccs would arrange a new payment amount with each of your creditors, usually based on a reduced interest rate. you would then make a single monthly payment to the cccs which would distribute the funds to your creditors, based on the new payment amounts. there are several drawbacks to cccs, though. first, depending on your creditors, it may not be able to reduce your monthly payments enough to improve your financial situation. second, it may have a negative impact on your ability to obtain a loan, so you may not wish to enter into a dmp if you anticipate any large purchases, such as home or an auto, in the near future. third, the average dmp takes around 5 years to pay off your debts, so you must be willing and able to commit to a long-term repayment plan.

debt settlement

you may also want to consider the debt consolidation services offered by debt settlement firms. rather than making monthly payments to your creditors, these programs negotiate lump sum settlements with your creditors, frequently reducing your debts by 50% to 60% of your principal balances. these programs usually take only 3 to 4 years to complete, so this is a good option for many people to rid themselves of debt in a relatively speedy manner. in many cases they can also get you set up with a low monthly program payment, however you are making these special savings deposits in lieu of making minimum monthly payments... so you are not making payments to your creditors, which has negative consequences. there is one major drawback to debt settlement programs — they will significantly damage your credit while in the program and for at least a few years afterwards. you will also be exposed to your creditor's collection efforts, including letters calls and possible lawsuits. however, if you are currently unable to afford to pay your creditors, the hit to your credit and the negatives may be worth the benefit of ridding yourself of credit card debt.

in summary, there are many debt consolidation services and it's important that you do your research to understand your own situation and then what your options are. depending on your cashflow and ability to make monthly payments, you should first explore a refinance loan and then credit counseling or debt settlement.

video: debt consolidation - what is debt consolidation?

Struggling with debt?

Debt is used to buy a home, pay for bills, buy a car, or pay for a college education. According to the NY Federal Reserve total household debt as of Q2 2022 was $16.15 trillion. Auto loan debt was $1.50 trillion and credit card was $0.89 trillion.

A significant percentage of people in the US are struggling with monthly payments and about 26% of households in the United States have debt in collections. According to data gathered by Urban.org from a sample of credit reports, the median debt in collections is $1,739. Credit card debt is prevalent and 3% have delinquent or derogatory card debt. The median debt in collections is $422.

The amount of debt and debt in collections vary by state. For example, in South Dakota, 15% have any kind of debt in collections and the median debt in collections is $2323. Medical debt is common and 3% have that in collections. The median medical debt in collections is $682.

To maintain an excellent credit score it is vital to make timely payments. However, there are many circumstances that lead to late payments or debt in collections. The good news is that there are a lot of ways to deal with debt including debt consolidation and debt relief solutions.

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10 Comments

RRuchi, Dec, 2013
Great post. I hope you can write more good stuff like this article. If you have any problem regarding debt you can debt recovery through online services. [Marketing link deleted.]
AAshley, Apr, 2012
I applied for a credit card and was denied. I received a letter in the mail as to why, it said my credit score is 62!!! How can I fix my credit? I'm only 22, I've never had a credit card, I have 1 car repo and a couple of small loans (500 total). I don't understand how my credit got so bad. What can I do?
BBill, Apr, 2012
I don't understand a score of "62" either. Credit scores range from 300 to 850 for the popular FICO credit score, and 501 to 990 for VantageScore. A score of "62" is far outside of either FICO or VantageScore. The issuer must be using something other than FICO or VantageScore. Return to the credit card issuer and ask which scoring model it uses, and please share the name of the score and the name of the bank here.

Read the Bills.com article How to Improve Your Credit Score to learn seven techniques to boost your credit score.
TTiffany, Mar, 2012
We are considering bankruptcy after our business failed and we've been left with $40,000 in business/personal debt and a new job that does not pay enough to make this manageable. A close friend is willing to help us settle our debts and pay half or slightly more. Would a settlement be better for our credit than a bankruptcy?
BBill, Mar, 2012
If your credit score is your main consideration, then a settlement, which closes out the account, would be your best alternative. (How you pay back your friend is a separate issue. The total amount you would pay back under any alternative would depend on the type of bankruptcy that you would qualify for, and the amount you can settle for.) I recommend that you ask for pay for delete. If successfully done, this would erase the derogatory item from the credit report.
KKara, Jan, 2012
I have 6 open credit cards in good standing, with an average of 22% APR (OUCH!), totaling about $2000, along with 2 payday loans about $650. I am in over my head because I lost my job and found a new job with less pay. I cannot afford these monthly payments. I called a debt relief program and they got the percentage down to 8.5% but still $130 per month, they will not help with payday advances and all though I know it gets my APR down it is still too much to pay monthly..Is debt consolidation right for me? Or should I try paying on my own? Asking CC companies for lower interest rate? Im afraid I will not qualify because the cards have been maxed out but I have been making timely payments. I do not know how to go about haggling with them. Also is there anyone advice how to stop payday advance fees or a company that may help paying those off with no fees as well? NEED ADVICE AND HELP ASAP!! Thanks
BBill, Jan, 2012
For more information about payday loans read the Bills.com article payday loans information. There are many more options available to deal with credit cards. Credit Counseling is one option, and perhaps the one you tried. If the solution is not workable, you can try to negotiate with the credit card companies. Offer to pay a sum that would be in your budget, but still be attractive to them.