The Difference Between Debt Consolidation And Debt Counseling
A lot of people often become confused with debt consolidation and debt counseling. These two may be similar,but they are still separate entities. If you have bad credit or are having difficulty managing your finances,you should know and understand the difference between debt consolidation and debt counseling before you choose any of them.https://www.floridadebtreliefhelp.com/ft-lauderdale-fl/
Debt consolidation is a system that will allow you to merge all your unsecured debts into a single payment. So instead of making multiple payments,you will only be required to send a single payment to the debt consolidation company of your choice. This company,in turn,will pay your creditors using the money you sent.
With debt consolidation,you can use the money you got from a loan to pay off your other debts. Because of this,you will have an even bigger account that you need to pay off. Nonetheless,choosing this option can make you obtain lower rates of interest. It is not available for all people,though. If you do not have great credit,your debt consolidation application may be denied.
In other words,debt consolidation can either consolidate your debts into a debt management plan or consolidate your debts into a new loan. This debt reduction system is perfect for those who still have good credit but do not want to pay too much for their individual loans. If you consolidate at least five credit card payments into one,you will be able to save money.
Debt counseling,on the other hand,is a service that will allow you to manage your finances and simplify your spending habits. Debt counseling services usually promote debt management plans as tools for getting out of debt. If you use this plan,your total debt can be reduced because your debt counselor will negotiate with your creditors.
With debt counseling,you will also be required to make one payment monthly. You will give the specified amount to your debt counselor,and he will be the one to give it to your creditors. One great advantage of this option is that is simplifies transactions. You do not even need to have good credit to borrow money.
In addition,this option will not affect your credit score negatively; and once you are done with debt counseling,you can expect your credit score to stay the same or improve. It will not go lower,so there is no need to worry. Then again,this option also has disadvantages. For instance,you will not be allowed to apply for more loans while under debt counseling.
You cannot apply for a new credit card or any type of credit account. Your application will only be denied if you try. You may not even be able to use your credit card because clients who are under debt counseling usually have their accounts frozen. Even if the situation really calls for it,you will not be able to use the card.
Debt consolidation and debt counseling are two separate entities with different sets of pros and cons. You should review each of them in order to find out which option is more suitable for your financial situation.