What is the Difference between Debt Consolidation and Debt Management ?

You may have heard a lot about debt consolidation and management and are not sure what plan with what company would be right for you in your situation. It may be difficult to determine which path to take when you are seeking to gain financial independence.

Debt consolidation loans usually involves an outright loan that allows you to pay off many of your other debts. It requires a very good credit score and sufficient income. Debt consolidation rarely is an option for paying off substantial amounts of debt unless you can secure the loan with your home or other valuable property.

One particularly helpful type of debt consolidation and management is called a debt management plan. These plans allow you to pay the debt management company in one consolidated payment each month. This payment then will be distributed in predetermined amounts between your creditors. Unlike some programs, you will still keep your original accounts with the creditors. However, you will be paying them through the debt management plan. Each month you will be able to see how your one payment is allowing you to steadily pay down your debt.

The debt management plan is a helpful type of debt consolidation because the debt management company can arrange for you to gain a reduction in interest and fees on your accounts. This allows you more of your money to be applied to the debt itself. Through this process, you should be able to pay off your debt in a much more reasonable amount of time.

You will want to make sure that you work with a company that can handle all of your unsecured debt. Also, if you find one that is nonprofit you will often pay less in fees. No matter what company you work with, you should double check that you will in fact be saving money by following the plan rather than by paying off your debt on your own.

When you are tired of seeing your credit card bills stay stagnant or rise, seek debt consolidation and management plans to gain a way out. With a little help, you will be back to financial security.
Ronnica Rothe graduated Magna Cum Laude from the University of Oklahoma. She is currently enrolled at Southeastern Seminary in Wake Forest, NC.

She is a regular contributor to educational information disseminated through Personal Financial Network. Related information can be found at Debt Management and Consolidation.
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