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There are three types of debt consolidation or settlement programs available to help pay off your debt. All three are meant to lower your monthly payments and pay off your debt in a shorter time period. But that's where the similarities end.
The first debt consolidation option is a debt consolidation loan. You can use this to consolidate almost any type of secure or unsecure debt. Most debt consolidation loans do require good credit and probably collateral. This can be a road block if you lack the home equity or have poor credit. But if you qualify, you'll typically be debt free in just 3-5 years (depending on your debt amount) compared to over 25-30 years it would take by paying just the minimum payments on those credit cards.
The second debt consolidation program is consumer credit counseling. With this option, a credit counseling agency renegotiates with the creditor to lower and change your monthly payments from compounded to simple interest. Your monthly payments will probably be a little less than you're paying now and best of all, depending on your debt amount, you'll be debt free in just 3-5 years.
A third and increasingly popular debt consolidation option is Debt Settlement. Debt Settlement can be only used in consolidating unsecure debt such as medical bills, credit cards, and collection accounts. It is NOT a viable option for secured loans like home or auto loans. Debt settlement also allows you to have bad credit and even be considering bankruptcy. How it works is that a debt settlement agency negotiates down your unsecure debt by as much as 45-60% and sets up a monthly payment that is usually about half of what you're paying now. Best of all, you'll settle your debt in just 2-3 years! One negative of debt settlement is your creditor will report your account as late until the account is settled. This is still as a better option than filing bankruptcy, which will affect your credit record for 10 years!