Debt Consolidation vs. Credit Counseling: Understanding the Difference
Entering the world of debt management can be confusing and intimidating. Make sure that you do your research so your debt management strategies lead to real debt solutions.
AFS offers consumer credit counseling services that empower our clients to make the right financial decisions and gain control of their finances. Over time, our clients dramatically improve their financial situation by reducing debt and improving their credit scores over time. We do this without high interest debt consolidation loans, which can lead to more financial trouble.
Debt consolidation means taking out a loan to consolidate all of your unsecured debts into one. Generally this is either a home equity loan or a high interest debt consolidation loan. With a home equity loan, you are using your home’s valuable equity to pay off unsecured debt, stretching out the repayment of the debt and putting your home at risk if you are ever unable to make the payment. A debt consolidation loan is usually a signature loan given by a financial institution which may make your life easier for a while as you will only have one payment, however the higher interest rates on such loans will have you paying more for your debt over time and there are no creditor concessions attached to such a loan.
In direct contrast our credit counselors will listen to your needs and work with you to develop the best course of action for your unique situation and help you pick the best solution to manage your debt.
AFS in-depth credit counseling and financial education courses will help you develop better ways to manage your debt payments. Some customers will find that our free financial education courses (available via our website) and the information provided in our credit counseling session’s gives them all the information they need to better manage their finances.
If appropriate for your situation, our credit counselors can also help you set up a Debt Management Plan (which is available for a modest fee each month) that will consolidate your debt payments into one convenient monthly payment. When you enroll on a Debt Management Plan, your creditors will generally lower your current interest rates, waive or reduce fees and in many cases bring your accounts into a current standing after you have made three consecutive, on time payments.. When you stick to the Debt Management Plan, your credit rating will rise as your debts are paid off and your financial peace of mind is restored.
