Studies show that most consumers who suffer from debt problems were burdened by the high rates of interests. For instance, credit cards- particularly credit cards with rewards have an interest rate that ranges from 15% to as much 20% or even higher. Thus, carrying over balances from month to month also means paying the extra 15-20% interest payment. It is not wonder how debts can build up quickly in just a span of a few months.

When stuck in bad debt, there are two steps that you may consider - debt management and debt consolidation. Many credit counseling agencies offer debt management or debt consolidation as a viable solution to extreme debt problems. What is the difference between these two debt solutions?

Debt Free Through Debt Management

How can debt management help? When a borrower enrolls in a debt management plan, he/she would submit his monthly payments to the consolidation company. The consolidation agency would be the one to distribute payments to the corresponding creditors as needed. Debts with highest interest rates would be paid first to stop the bills from accumulating.

Debt Free Through Debt Consolidation

Another way is to obtain a loan which would be used to pay off all debts from different creditors. In turn, the borrower would be subjected to a monthly repayment to his consolidation lender. Since debts have been combined, the borrower can enjoy a reduced interest rate and lower monthly payments. Debt consolidation agencies can also negotiate with creditors so debts can be reduced significantly.

Find a Trusted Consolidation Service

When consolidating debts, you need to make sure that you’re dealing with the right company. Remember that not all consolidation services in the market are for real. Some may take advantage of your situation and instead of helping you be debt free, these fake agencies may put you into a far worse debt situation.

Thus, to avoid getting ripped off, do extensive research. Check the Better Business Bureau if there has been cases of complaints against the company. Examine the debt consolidation company’s track record of service. Make sure that it has handled a lot of debt cases and has helped many clients be set free from their debt problems.

Related Article: Living Debt Free Through Debt Consolidation

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