Debt Consolidation 101 For Those With Bad Credit
InCharge Debt Solutions offers counseling to help those with poor credit history solve their debt problems
ORLANDO, Fla., Sept. 11, 2012 /PRNewswire-USNewswire/ -- Debt consolidation has become something of a "catch-all phrase" for American consumers seeking to find a solution to their debt problems. Most consumers are not aware of the differences between the types of debt management assistance available, such as credit counseling, debt consolidation, debt settlement, and bankruptcy. Here is a summary of each of these approaches:
Credit counseling - You learn about alternative solutions in a free counseling session with a certified credit counselor that will help you find the best debt solution for your situation. During your session, your counselor will analyze your current financial situation, taking a look at your assets and liabilities, as well as your income and expenses. You will be guided through a home budgeting exercise in which potential expense savings may be recommended in order to help attack your debt problems. Your counselor will then explain all potential solutions and recommend those which are available to you. You will be responsible for choosing the solution you feel is right for you.
Debt management program - With a debt management program you may get reduced interest rates regardless of your credit score, but the real benefit is that you will be able to pay off your debts in a much shorter period of time than you could on your own. While it is recommended that you close all credit card accounts on the program, you may be able to keep one account for business and emergency use.
Debt consolidation - You take out a "consolidation loan" to pay off all of your debts and combine them into one single loan and payment. This is typically done through a bank and you will simply be adding a new loan but not solving your debt problems. For consumers with bad credit scores, a new consolidation loan will come with very high interest rates and your monthly payment may be even higher than the sum of all your previous payments.
Debt settlement – You default on your debt while sending monthly payments to a debt settlement firm that negotiates a one-time payment of less than the original balance due. You may owe taxes on the forgiven amount and you can be sued by your creditors during the process. The debt settlement solution comes with negative credit score consequences.
Bankruptcy – You go through a legal procedure which can potentially eliminate much of your unsecured debt. Creditors may not contact you after you file for bankruptcy. Bankruptcy can have a negative effect on your credit history for up to 10 years.
"Anyone with bad credit and overwhelming debt problems should consider nonprofit credit counseling as a first resort because a complete budget analysis and financial evaluation will be conducted to help determine the consumer's best solution," suggested Etta Money, President of InCharge Debt Solutions. "So, whether consumers call it debt consolidation, debt settlement or a debt management program, getting free guidance from a nonprofit certified credit counselor will give you the unbiased information you need to start your journey to a debt free future."
InCharge Debt Solutions, a nonprofit 501(c)(3) organization, provides bankruptcy counseling, credit counseling, and housing counseling services to consumers and service members in need of financial literacy education, money management guidance, and help finding the right debt solution for their specific situation.
For more information, contact InCharge Debt Solutions:
- For bankruptcy services, call 866-729-0049.
- For credit counseling, call 877-486-4924.
- For housing counseling services, call 877-251-1882.
- For servicemembers, call 877-258-9549.
- Or visit us online at www.InCharge.org
About InCharge® Debt Solutions
InCharge® Debt Solutions is a 501(c)(3) non-profit organization specializing in personal finance education, housing counseling, bankruptcy services, and credit counseling. Founded in 1997, InCharge interacted with over 1.1 million consumers in 2011 alone. InCharge is affiliated with InCharge® Education Foundation, Inc. (ICEF) which is dedicated to providing educational products, services and research supporting the personal financial literacy of consumers across America. ICEF also provides financial literacy training to servicemembers and their families through MilitaryMoney.com. InCharge is a member of the National Foundation for Credit Counseling (NFCC), and is accredited by the Council on Accreditation (COA).
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InCharge® Debt Solutions
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