Options to Consolidate Your Debt into One Payment

Consolidating debt involves take out just one loan to successfully pay off a multiple number of other debts. Many times debt consolidation is chosen to secure lower interest rates, for the convenience of having only one loan, or to obtain a fixed interest rate. This debt option is common among both companies and people who are suffering with credit problems, including credit cards, student loans or auto loans that are maxed out. Three popular options for consolidating your debt today include credit counseling, debt consolidation loans and debt settlement.

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Credit counseling

Credit counseling is a type of debt consolidation that focuses on consolidating payments, lowering interest rates and negotiating penalty and late fees. Advantages of credit counseling include arranging one monthly payment, structured payment plans, the end of debt collection calls and a time frame of becoming debt free. Disadvantages include the freezing of accounts, the negative impact on credit and the chance that loans cannot be obtained while undergoing credit counseling.

Debt consolidation loans

Debt consolidation, also called a consolidation loan, is the process of taking out one loan to pay other debts; allowing the consolidation of the money owed be made into one payment. This consolidation often provides a lower monthly payment and an extended repayment period. The advantages of debt consolidation include having an easier time managing payments of many debts, consolidating different interest rates of different debts, and being able to avoid negative credit.

Debt settlement

Debt settlement, also referred to as debt arbitration or debt negotiation, involves the negotiation to lower payoff amounts attempting to resolve outstanding debts owed to creditors. This debt reduction involves both creditors and debtors who agree on a balance that has been reduced and regarded as being paid in full. Advantages include payment of a debt without paying the total amount owed, deletion of a negative impact on credit and all collection calls and legal action comes to a stop. Disadvantages of debt settlement include the negative impact on credit (debt is showed as settled and not paid in full), the chance an outstanding balance is sold to a different collection agency and savings from debt settlement being reported to the IRS as forgiven debt or a form of income.