Credit Counseling Versus Debt Consolidation

Written by , February 22, 2010

When you’re in a lot of debt, it makes life more stressful and less enjoyable. By the time most people see the error of their ways, they’re already in so much debt that it will take them many years to dig out from it. Fortunately, there are options that can help you get your debts paid off more quickly.

Two of those options are credit counseling and getting a loan. With credit counseling, a third party negotiates lower payments and interest rates for you. You then start making one monthly payment to the credit counselor, and he forwards the monthly payments to your creditors on your behalf. With a debt consolidation loan, you simply take out a loan, use the proceeds to pay off your existing debts, and then repay the loan.

Both of these methods can help you successfully repay your debts. Which one is best for you depends on your unique circumstances. Here is some advice on the pros and cons of credit counseling as opposed to debt consolidation loans to consider.


  • In addition to negotiating with your creditors, a credit counselor will help you work up a budget. This will help you pay off your debts more quickly and better manage your finances.
  • You won’t have to take on an additional loan if you get credit counseling. Getting a debt consolidation loan gives you access to more credit once you pay off existing bills, so if you’re not careful, you could end up in more debt than you were in to start with.
  • A credit counselor will take your income and expenses into consideration when negotiating with creditors. That means that you should end up with a monthly payment that is affordable to you. If you get a debt consolidation loan, the payments may or may not be affordable.
  • Cons

  • When you undergo credit counseling, it is noted on your credit report. You won’t be able to get additional credit until you have repaid your debts in full. That will prevent you from getting further in debt, but if you have a legitimate need for credit, you’ll simply be out of luck.
  • Credit counseling isn’t free. There is a fee tacked onto each monthly payment that goes to the credit counseling agency. Usually this fee is reasonable, but it’s important to know exactly how much you’re paying for the service.
  • With the credit counselor making the payments to your creditors, there’s no guarantee that they will be made on time. You could be responsible for late fees if they’re not, even though the delinquency was through no fault of your own.
  • Credit counseling and debt consolidation are both viable options for those who are in too much debt. But either way you go, it’s crucial to carefully consider your options and check out any agency or lender you choose to work with. Doing so will help ensure that you make the right choice and don’t get burned.

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