Should I Sign Up With A Debt Consolidation Service?

It depends. First, identify your financial goals. What led you to thinking about signing up with a debt consolidation service? A credit counseling agency or debt consolidation service does not wave a magic wand to reduce your debt. Good ones will methodically help you get out of debt, but the bad ones can really destroy your credit. Here is the difference:

Bad Credit Counseling Agency: They will ask you to send them a lump sum amount every month to pay off your debts, but instead of paying your minimum payments on time each month, they will default on all of your debts. Then, they’ll try to reach a negotiation settlement with each debt owed. This trashes your credit, and it takes months, sometimes even years to get creditors to reach a settlement. An agency like this will destroy your credit for years to come. Remember, just because an organization is a non-profit doesn’t mean it’s a good company.

Good Credit Counseling Agency: They will gather all of your financial information including all of your debts owed to credit card companies and other charge accounts. Then, they will come up with a lump sum amount that you will pay them every month. Then, they will pay each minimum payment and put the rest towards either your smallest debt or debt with the highest interest rate. To find a reputable debt consolidation company, go to the National Foundation for Credit Counseling to find a list of their preferred agencies.

Things to Remember: