Debt Consolidation Companies Vs Debt Consolidation Loans: Which Is Better?
The hard and scary truth of the matter is – debt happens. It happens to a lot us for a lot of different reasons. And, when you end up in that place where your bills are more than your income, it can feel like you’re drowning. With creditors knocking down your door and sending pounds of notices, what do you do? Where do you turn? How do you get debt free?
Luckily, you have options. Debt doesn’t have to last forever. Unfortunately, not all options are good ones. There are lot of scam companies and scam offers which can weigh you down and cost you more.
Before you make any major debt relief decision, it’s important to carefully weigh your options and decide which one is right for you. Two of the solutions you might consider are: using a debt consolidation company or securing a debt consolidation loan.
Debt Consolidation Companies vs. Debt Loans
What is a Debt Consolidation Company?
A debt consolidation company becomes your advocate. Think of them as a debt settler – they approach your creditors and negotiate reduced settlements, allowing you to pay less per dollar owed.
Benefits – While you may like the idea of negotiation your own debt settlement with creditors, this can often be an extremely time consuming process – a process that can be more like a fulltime job. And, often creditors just won’t talk with you. But, most debt consolidation companies have pre-established relationships with creditors which helps them communicate where you might be unable to.
Cost – Typically, you will pay a debt consolidation company a monthly fee for being your negotiator. And, the debt consolidation company will collect a sum from your creditors. With most debt consolidation companies this sum is not disclosed.
Watch Out – Because debt consolidation companies become your voice, it’s incredibly important to work with a reputable one. There are A LOT of scammers out there who will take advantage of your situation and cause you to fall into debt. Prior to signing on the dotted line, make sure to check to check into the company you are considering.
What is a Debt Loan?
It’s a loan. There are no ifs, ands or buts about it. A debt loan is a large sum of money you borrow to pay off your bills and consolidate your monthly payments into one – typically larger – monthly payment.
Benefits – Managing multiple payments can be difficult, as can fielding multiple requests from hounding creditors. By consolidating your monthly payment, you only have to pay one provider.
Cost – As with all loans, a debt loan has an interest rate. It’s important to realize that with a debt loan you don’t reduce the amount you owe. You still owe – and pay – for all of the debt you have occurred. But, you are able to do so over a longer period of time. The drawback is, you pay more over the lifespan of the loan.
Watch Out – Nothing will make your situation worse than obtaining a debt loan you can’t afford. Make sure to evaluate your monthly earnings and expenditures prior to signing on the dotted line. Can you handle the cost of your monthly loan payment? If the answer is no – look elsewhere.