Debt Consolidation or Credit Counselling

Thinking of options for reducing debt? debt consolidation is the method traditionally used to reduce debt but it's not the solution for everyone.

Debt consolidation, if it works out well, allows you to lower interest rates on the debt and give you more time to pay it off. Alternatively, working with a credit counsellor, you can devise a debt management plan, or even get some of your debt written off, so which of the two options is best.

The Debt Consolidation option
Debt consolidation is a way to reduce the amount of money you're paying out by bringing all your debts to one lender. This usually means taking out a loan that is equivalent to all your debts.

This option is best if you have a decent credit rating or are a homeowner, that way you would be able to get the loan at a low interest rate.

Assess the terms carefully and if possible, get quotes from various lenders in order to compare the rates.


The Credit Counselling option
With credit counselling you can enlist an expert to help you deal with the debt. Credit counsellors deal with people in a similar situation, their knowledge and experience will help in coming up with the best possible plan.

They're able to speak directly to your lenders and negotiate rearrangements. If they believe your situation is dire i.e. where you're at risk of bankruptcy, they can help you arrange an IVA.

Another advantage of credit counselling is that you might get this service free of charge if you approach one of the charities that are set-up to help people deal with debt, in the UK one such charity is the Citizens Advice Bureau.

What's the right option
Credit counselling is the best option if you're under pressure from creditors or believe you can nolonger manage your debt without some help. The downside is that your credit rating will be adversely affected.

If your aim is simply to rearrange your debts and have a reasonable credit rating, then it's better to consolidate and spare your credit rating as well as save yourself potential counselling fees.


Related Pages:
loans for people with bad credit - Adverse credit loans
unsecured loans with bad credit - Bad credit loan
credit cards for people with bad credit - bad credit credit cards