Debt Management Tools

Debt management can include anything from home equity loans to credit counseling services. Read on for a brief overview of some of the most popular and helpful ways to manage debt.

Consolidating Debt Professionally

Most forms of debt management are basically self-help programs, which often limits their efficacy. By contrast, professional debt consolidation recruits the assistance of an experienced team of debt experts to optimize your interest rates and payments. Debt consolidation professionals work with credit card companies all the time, and they know how to structure a repayment plan that works for all parties involved. Your consolidation service will work with you to build a repayment plan that gets you out of debt rapidly without requiring prodigious monthly payments. You will make payments to the consolidation service every month, the service will pay your creditors, and you will eventually become debt-free.

Debt Management Loans

Consolidating debts by taking out additional loans can seem counterintuitive, but it may work for some consumers. If you can find a loan with better interest rates than what you're currently paying on your debts, you can use the loan to pay off your existing debts. After doing so, you only have to make payments on the consolidation loan. Ideally, your monthly payments will be less expensive, and you can pay the new loan off faster than you could've paid off your old debts. The problem with this approach to debt management is that many debtors cannot qualify for consolidation loans with good interest rates. Many of these loans require some form of collateral, such as a home or a vehicle. One type of consolidation loan that doesn't require collateral is a credit card balance transfer, but these loans are just a temporary fix for a long-term problem.

Credit Counseling Services

Credit counseling organizations offer debt management advice and consultations for minimal cost. Credit counseling agencies are usually not-for-profit organizations designed to help consumers overcome debt and avoid bankruptcy. Unlike debt consolidation companies, credit counselors rarely deal directly with your creditors. Instead, a credit counselor will provide advice on how to deal with your creditors more effectively and arrange a repayment plan that you can afford. The advantage of credit counseling is that it can be combined with any other strategy to manage your debt. For example, you could enroll in consolidation and also seek out the guidance of a credit counselor for extra help.