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The best way to deal with debt is to pay it all off on your own. This isn’t always possible, however, due to constantly changing circumstances that may at times not even allow you to pay the minimum payment on monthly bills.

Many people who find themselves deep in debt turn to debt consolidation to aid them in getting out from under their debt. This is done by getting a home equity loan, moving all your debt to one credit card with a low interest rate, or taking advantage of the help offered by debt consolidation services.

How do these services work?

Debt consolidation services work together with your creditors to help make your debt more payable by canceling fees that have been charged to your account because of late payments or charging over your credit limit. These agencies can also get credit card companies to lower your interest rates. If you decide to use a debt consolidation service, you will pay them directly and then they forward your payments to the creditors you owe.

Pros

Credit counselors are normally able to work with credit card companies to reduce your payments and interest rates even if you have tried to do so without success. You can also be helped to arrange a budget that will work for you by a counselor, all with the goal of assisting you to care for all necessary expenses while still saving money to use in paying off debt.

Cons

One problem with credit counseling is that it sometimes does not result in a monthly payment that the client can afford. Creditors are only willing to negotiate so far, and if you owe a lot of money you may not be able to afford the best deal they will give you. If that is the case, you’ll have to either find another means of paying your debt or consider bankruptcy.

Another thing about credit counseling is that it isn’t free. Credit counseling agencies may charge monthly fees for their services, adding them on to your monthly payment. If they don’t, they have to get the money to pay their employees somewhere. That “somewhere” is usually from your debtors, as a percentage of your payment.

Using a credit counseling service to eliminate your debt does appear on your credit report, but will not necessarily reflect badly on your credit. Some creditors view Chapter 13 bankruptcy and credit counseling programs to be basically the same thing. While you are eliminating debt by means of such a program, you will not normally be extended any additional lines of credit.

Just like any other business, there are some credit counseling services that should not be trusted with your money. You can check the Better Business Bureau for information on which agencies are best. Use that information to make an informed decision about which agency to go with.

Credit counseling may be able to help you get your debts paid off. But it is important to consider the pros and the cons of entering such a program. Trying to work out a deal with creditors on your own may work, eliminating the need to get a third party involved.