Credit Counseling

Credit Counseling applies a “debt consolidation” model, which reduces The interest that you pay on your total debt principal.  But unfortunately, in these days of high financial volatility,interest rates are not going down. THEY ARE ONLY GOING up . Adding to this problem, Credit Counseling programs only negotiate a basic reduction of The actual interest rate, typically, 2-6%.  Consequently, The promises that Credit Counseling programs make are simply unreal, which causes them to have an alarming 79% dropout rate. 

The lackluster success of Credit Counseling is largely due to in part to The reality that interest rate reduction alone generally CAN NOT provide enough financial relief to people that have severe financial problems.   Moreover, Credit Counseling causes you to pay almost double your original debt because you will pay The amount loaned to you plus an enormous amount of interest, something that isn’t fair since you already paid back so much to your creditors and now your problem may have gotten worse.

If you’re concerned about not having long-term damage to your credit, aside from Bankruptcy, Credit Counseling may be your worse choice.  Upon enrolling in a Credit Counseling Program, your enrollment-will be listed negatively on your credit report until The point you pay off your total debt in an average of 5 to 7 YEARS.  Plus it will continue being reported for up to 7 more years after you complete The program. Thus, your credit can be adversely affected up to 14 years! in closing, Credit Counseling is an option that should be very carefully considered.

Debt Consolidation

Debt Consolidation is The process of merging a number of unsecured loans, typically debts with high-interest balances, into one single lower interest loan.  The problem is that to get a low interest Debt Consolidation loan is very risky because it generally involves trading unsecured debt like you’re your credit cards for a secured loan.  This is typically achieved by getting a mortgage loan and securing your home or other asset as collateral for The mortgage lender. But in The event that you default on any mortgage payment-, The collateralization of your loan will allow a mortgage lender to foreclose (force The sale of your asset) in order to force you to pay back The loan.

Another problem with Debt consolidation loans is that they frequently are a temporary treatment-to The symptoms of debt, but do not address The root of your problem. Unfortunately, most people that get Debt Consolidation loans have excessive credit card debt because they spend more than they make and statistically, 75% of these consumers eventually reincrease their credit card balances and incur more debt.  Thirdly, getting a Debt Consolidation loan can affect your ability to discharge some of your debts if you file for bankruptcy.