Many financial experts will tell you that the best pay to get out from under the burden of huge debt is as we have described – pick a credit card, pay it off, move on to the second credit card and so on until you’ve completely vanquished them.
However, there are some other ways to pay off that debt that don’t take as much time and self-discipline.
You may have seen TV commercials promising instant debt relief through debt consolidation. And this can work – assuming you can choose a company that won’t rip you off. The original credit-counseling agency (for debt consolidation) was called Consumer Credit Counseling Services and was actually formed by the credit providing companies. The way it works is that you meet with counselors who will help you develop a budget and negotiate a plan to pay off your creditors.
Following this, you would write a check to CCCS each month and it then sends payments to your creditors. This was a free service because it was good for the credit providing companies who paid for the cost of the Consumer Credit Counseling Service.
Since then, a number of non-profit and for-profit companies have jumped into this business. They often promise they will get you out of debt very quickly. Unfortunately, some of these companies are little more then rip-off outfits that will take your money but never pass it on to your creditors.
If you feel that credit counseling and debt consolidation would be a good solution, look to see if there is a Consumer Credit Counseling Service in your area. Be sure to search by that exact name. If there is no CCCS in your city, ask one of your credit providers for a recommendation. That way, you won’t make a bad choice and end up in more trouble than when you started.
The pros of credit counseling are a lower interest rate, one lower monthly payment, and more time to pay off your debts. This debt management plan may be a good choice if you can stick to the plan.
This leads us to the cons of credit counseling. You must stay in the plan for it to work. This can take 48 months or more. Can you commit to a plan that long? Another con is the balance is not reduced just the interest rate.
Many people who start a debt consolidation plan with credit counseling have good intentions but cannot complete the plan for some reason or another. Due to the lack of flexibility with credit counseling, there is a high failure rate with this form of debt management.