If you're stuck with mounting credit card debt, consider looking into credit counseling as a means of a debt solution.

The benefits of credit counseling include but are not limited to: lowering your interest rates, reducing the payoff time frame, and avoiding bankruptcy.

There's a multitude of references to debt consolidation in the media, specifically since the downturn in the economy and the similar development in the number of consumers carrying large unsecured debt balances. But there are many misunderstandings about debt consolidation, and many Americans have either an inaccurate or incomplete prospect of exactly what it is. So it isn’t in any way surprising that numerous poor decisions are being made in financial matters that matched to it. While the term consolidation itself can be looked as combining two or more things into one, debt consolidation can refer to a couple of type of financial situation. To obtain a better grasp of the concept, it’s helpful to take a closer look at both most commonly encountered types of debt consolidation.

The first form of debt consolidation describes a case in which an individual has a couple of debt, such as a few plastic cards, some loans, or perhaps even a mix of both. He may decide to pay off these individual debts by taking out just one larger loan through a refinancing of a home, by using a home equity credit line (HELOC), or by taking out a personal loan. The proceeds of the new larger loan are then used to pay off the individual debts. The main benefit of having done this are that generally the debts being cleared have higher interest rates, there can be some tax advantages in the new arrangement, or both. The consequence of this process is that the individual has consolidated his debts and is now making just one monthly payment toward the combined debt. The included debts could be either unsecured or secured.

The second form of debt consolidation describes a situation in which a consumer obtains debt assistance through a company by means of a debt consolidation plan. The business, often a debt management business (often known as a consumer credit counseling agency), will probably merge the consumer’s individual unsecured debts in such a way that only a singular payment on monthly basis becomes necessary. This debt consolidation payment is made to the agency, who then pays the individual creditors according to the terms of an agreement. If you notice in this setting, instead of the very first, the debts themselves have actually remained separate from one another, and it is only the payment that has been consolidated. Only unsecured debts are eligible.

There are two different companies that provide the individual this second form of debt consolidation, each offering some other program. One is the aforementioned debt management company, that offers the client a consolidated payment toward the total amount owed on the individual debts. A debt settlement company will offer you a debt settlement program that also allows the client a consolidated payment. But here, the payment is made toward the negotiated amounts of the balance due. It will also be noted here that debt consolidation even takes place in a Chapter 13 bankruptcy, as a consolidated payment is made to the trustee for the debts included.