Figuring out the difference between a debt management service and a debt consolidation loan can be a little tricky. While both are designed to lower your payments and get you out of debt, each goes about this task in a different way. It is important to understand the differences between the two services so you can make an educated choice about which one would work best for you.

Debt Management Services

Debt management services offer many types of assistance and resources to help you lower your debt. Usually these services are non profit and they work with you to prepare a budget that will help you get out of debt and stay out of debt. They tend to be more fixated on educating the consumer on money management more than anything else. They often offer one to one counseling, finance classes, budgeting workshops, and bankruptcy counseling. Their goal is to get you back on financial track. Some debt management services also work with your creditors to lower your monthly payments, lower your interest rates, or even reduce or remove late fees and finance charges. Debt management companies don’t lend you the money to pay off your high interest credit cards, turning many payments into one.

Debt Consolidation Loan

A debt consolidation loan is a loan that is used to pay off higher interest loans like credit cards. It usually reduces your monthly payment and your interest rate, making it easier to pay off your debt faster. When you have more money to live on each month that can help to keep you out of further credit card debt. Often a consolidation loan requires that you own a house, so that the loan can be taken against equity in the home. There are risks involved with putting your house up for collateral on a debt consolidation loan. Should something unexpected happen to your income and you find that you can’t make your loan payment, you could lose your house. While this is an unlikely scenario, it is a possibility and should always be considered.

An unsecured loan for debt consolidation gives you the opportunity to consolidate your multiple debts into a single manageable loan. When compared to other outstanding debts, the rate of interest of unsecured debt consolidation loan is very low. For debt consolidation, the borrower has to make the loan lender aware of the amount of debt as well as the different creditors. And the lender himself deals with all of them.

The amount of money that can be borrowed as an unsecured debt consolidation loan depends on a lot of factors. They are repayment terms, interest rate, scheme offered to you and your credit situation.

You can take a debt consolidation loan if you are paying high interest charges on your existing debts and want to switch to a cheaper alternative; if you want to reduce the size of your monthly payment because of a reduction in income; or if you want to meet unexpected commitments.

Different online lenders provide unsecured debt consolidation loans. One can easily go through the procedures and details of applying for the loan. All you have to do is fill out an application form and the rest will be done by the software on its own. There are websites providing online debt consolidation loan calculator service for assisting in calculations. The calculator helps you to calculate the amount of money that you have to pay per month by comparing your existing payment and total debt.

Lenders require a good credit rating to sanction an unsecured debt consolidation loan. If the borrower meets the lenders? requirements, then he can request a quote.

The fixed repayment period offered helps you to become debt free within a set period of time. No collateral is required for unsecured debt consolidation loans and the loan processing does not take up much time. There is also an increased opportunity to improve the credit score.

The term unsecured debt refers to a loan that is not connected to any type of physical collateral. If the borrower defaults on an unsecured debt, the resulting action may cause extensive damage to the borrower’s FICO credit score, but the lender has no legal ability to take property, such as a car or home, in collateral for the defaulted loan. However, there are still checks in place to ensure that more serious consequences can still occur when a borrower defaults on an unsecured loan.

Some of the most common forms of unsecured debts are: credit cards, legal bills, medical bills, mobile phone bills, and health club memberships. Young people are especially likely to carry unsecured debt with high interest, particularly in the last ten years with the expansion of credit card use. In fact, most people do carry some form of unsecured debt and must remember that it is still extremely important to pay these bills on time despite the fact that the creditors cannot take something from you if you do not pay.

Simply because the bank or other lender cannot take your property when you do not continue to pay the loan, doesn’t mean that a ruined credit rating is the only thing that can happen in this situation. Banks and lenders also have the right to sue you for the amount owed as well as garnish your wages as a way of getting the money they are rightfully owed. It is also valuable to note that declaring bankruptcy does not automatically clear your unsecured debt. It is up to your attorney and the agreements that are made between your representation and your creditors. While the total value owed may often be reduced, counting on a declaration of bankruptcy to save you from your debts is simply not the answer. There may be other ways to find debt relief by carefully researching your options and making sure you understand all of the consequences of any actions you may take in an effort to manage your total unsecured debt.

One of the negative aspects of unsecured loans and debt is that it often has a much higher interest rate than secured loans. This means that if you are already in a position where your credit is too bad to obtain a secured loan, you will get stuck with the higher interest rates of an unsecured loan. Lenders use your credit number to determine the interest rates and type of loans you may be approved for. Getting trapped in the cycle of unsecured loans makes it difficult to catch up and pay off the loans in a manner that will not add a huge amount of interest to the final amount to be paid back. Finding a way to manage your debt successfully will ensure that you are able to continue your life in a way which allows you to be in control of your financial situation, no matter how grave it may be.

I have been in the credit card debt relief industry for just about 10 years now and have been in the financial industry for over 20 years. The point of this article is to give people a heads up on debt relief companies also known as debt settlement or debt negotiation companies. I will give you the pro’s and con’s of this process and what to watch out for when interviewing a company to help you get out of debt. Before I go on I want to let you know that this will be a rather long article and by the end of it my goal is to have you understand how the debt negotiation/settlement process works in case you don’t already know and I would like you to understand the tactics of companies out there that do not truly have your best interest at heart.

First I would like to state that the process of debt negotiation as your means of consumer debt relief is not for everyone, some people are better suited for bankruptcy and others do not have the correct mindset to go through this process.

I would like you to first understand what debt negotiation is and how it works. The goal of a debt negotiator is to obtain a debt settlement for you on the current debt amount you owe your creditor. So for example you may owe one particular creditor $10,000 so the goal of the negotiator would be to have you end up paying back say $6,000. The two main benefits of going through this process are to save money on what you currently owe your creditors and to save time. By just paying the minimum payment with even a modest interest rate you will be looking at 30 or more years to become debt free, with a sound debt negotiation program you will be out of debt within 2-3 years or sooner depending on your current financial situation.

Now you must understand these are great benefits but as with anything in life there are drawbacks, nothing is perfect and this consumer debt relief procedure is no different. For starters your creditors will not be willing to negotiate a debt settlement at all if you are current with your monthly minimum payments. They would prefer you to stay on their credit treadmill for the next thirty years and pay them back over four times the balance in interest alone. So you must fall behind on your payments to put the creditors into a position where they will be willing to settle. Once you stop paying them the ball game changes completely and they will then be willing to talk in terms of negotiating a settlement.

So obviously for some people the beginning of this process will have a negative effect on their credit score. For those who are already falling behind then the negative effect will be no different than it already is. Unfortunately for some people this will be the deterring factor that keeps them from going into debt settlement making them a slave to their creditors for the next thirty years. The good news is that this negative effect does not last forever, in fact once the settlements start coming through your credit score will begin to rebound and go back up. The reason being over 30% of your credit score according to MyFICO is based on how much debt you owe. But if you are stuck in a bad debt situation even if you are current with your payments your score is probably not all that good in the first place, and besides when stuck deep in debt your focus should be on how to get out of debt as quickly as possible, not on your ability to accrue future debt.

Now by falling behind on your debts you must understand that these creditors are just not going to roll over and play dead, they will be calling to try and collect the debt. For some this is not a problem at all, for others it is, that is why I stated above this process is not for everyone and the consumer must be in the correct mind set. From my years of helping people there is no rhyme or reason to how many calls you will receive some clients of mine barely get calls while others get them almost everyday. Something to keep in mind too is that no company has the power to legally stop the calls, so any company that tells you they can is flat out lying.

As you can see like I said earlier there are pro’s and con’s, but if you can accept the con’s you will be quickly on the road to financial freedom and will save a lot of money in the process. Now to get to the meat of the matter and why I named this article “consumer credit card debt relief scams”.

We here in America over the past couple of years have been experiencing a very negative downturn in our economy. Thus putting many consumers in a compromising position financially, leaving boat loads of people stuck in credit card debt. So naturally this opened up a much larger market for debt negotiation. Many fly by night companies have been popping up all over the country, many of which are ex mortgage brokers who sold people bad loans and helped them get into this sticky position in the first place. Now I use the word scam which can take on a few meanings, while yes there are some companies out there that are flat out scams and have no intent on doing any work for you at all, most of the times that is not the case. Instead many companies simply do not give people all the facts on how debt negotiation works nor do they truly put them on a plan for success, which I will explain in a minute.

One common issue that most consumers have with debt settlement companies is they do not fully tell them about how the process works, instead they sugar coat things and just preach about the great benefits. I have spoken to countless amounts of people who have signed up with companies and were under the impression that they were going to stay current with their creditors and will never receive any calls. So needless to say this became a huge problem once they began.

Another major problem a lot of these companies have is deceiving people into the kind of savings they will be getting on their debts. Some companies will say they will save you 70% of what you owe. Now while they may get settlements that low what their opting not to tell you is how much you will be saving after you have A) paid them their fees, and B) paid back the creditors. Honest companies will tell you what your true savings will be. If you will save somewhere between 40-50% of what you owe including their fees and paying the creditors than that is pretty darn good. Plus many of these companies will try and guarantee a certain amount of savings, if you hear this run for the hills. NO one in this industry can guarantee a certain amount that is why it is called DEBT NEGOTIATION! They are negotiating to get a settlement for as low as they can get.

Then there are the companies who will let you pay whatever you can to get on their program. These are the worst because they do not truly have your interest at heart and know they are setting you up to fail and not succeed. You must understand to achieve the type of savings I stated above this process should take no more than three years, preferably two or less. And the bottom line is some people simply cannot get it done in that time frame and should realistically be looking into bankruptcy. What these unscrupulous consumer debt relief companies will do is put you on a program for 4 or more years and basically accepts whatever payment you can afford. Knowing full well you are not going to be saving much of anything and will more than likely fail off the program, all they care about is getting the fees and that is it. An honest company will diligently review your budget with you and make sure this is something that you can manage, as well as fully explain to you both the benefits and drawbacks of doing this. And let you make the conscience decision as to whether this is the best consumer debt relief method for your situation.

Another very good way to evaluate a company is to make sure they are registered with the BBB (Better Business Bureau) and that they are in good standings with very few complaints. And if there are complaints make sure they were resolved to the clients liking.

As you probably know if you find yourself in heavily debt, then a debt counselor help from a trusted and reputable debt management agency is priceless. The American Consumer Credit Counseling is among the well known and highly recommendable non-profit debt management services, they are promptly to help individuals with their debt issues.

The American Consumer Credit Counseling is the way to go if you want to get private consultation in order to reduce your debt obligations or make them manageable, plus by using their financial related educational library you can learn all different aspects about debt management programs.

17 years of experience and thousands of people with their financial lives back to order avail this credit counseling service, they are able to resolve any financial position you could be in because of their highly trained credit counseling experts staff.

As usual, a workable debt management plan after a complete analysis of your current financial situation will be suggested, stick with it will be your responsibility throughout the process, as mentioned before each plan is labeled to your individual requirements.

While this debt management service is non-profit oriented, it does not mean that it is completely free. However, the charged fees are lower than many similar debt management services.

Nonetheless, this does not imply that the extra fee you pay to private debt management companies are not worthy, considering the extra services you can get in return it could be certainly a good investment that pays by itself.

All in all, if you are in a budget give a try to the American Consumer Credit Counseling and you will be fine, if you can afford an additional small extra fee, search and compare different private debt management companies, just make sure that you are dealing with a trusted and reputable private debt management agency with years of experience on credit counseling, debt consolidation and debt settlement.

Have you started receiving credit card debt settlement notices in the mail? Have you been receiving collection calls? If this is the case, you have probably been in debt and been dealing with financial difficulties for quite some time.

Creditors are sometimes willing to settle the account for a lesser amount if the credit card account is seriously delinquent or has been written off. This creditor will usually accept the settled amount in one payment and the payment has to be made within a short period of time.

Now you may wonder why a creditor would settle for less than what is owed. Your credit card issuer is trying to reduce their losses and they have concerns about you paying this debt. Your credit issuer feels that recovering some of their money is better than not getting any of it back. Keep in mind that accepting a settlement may affect your borrowing ability in the future with this creditor, but it is a better option than bankruptcy or doing nothing at all.

A creditor will not usually settle on an account that is current. Normally, the account has to be at least 90 days delinquent before they will talk settlement and many credit card companies will wait longer than that. Here are a few things you should be aware of before agreeing to a settlement.

1. Your settlement payment may not completely satisfy the debt. There is a possibility that the uncollected portion of the debt could be turned over to another collection agency for further collection activity, but this is not the norm.

2. The IRS considers the amount of the debt that has not been satisfied as income. Any amount that exceeds $600 will be report on a 1099, to the IRS, by your creditors. You will be required to pay taxes on this amount.

3. Know what’s on your credit report. If the debt is not on their at all, it is not recommended that you do anything with this debt. If it is showing as being “charged off,” this is negative note on your credit report. If you settle, it will be noted as “settled for a lesser amount” which as also somewhat negative, but not as bad as doing nothing about it at all.

The best thing to do is to try to deal with the original creditor. Communicate with them in writing. If they will not deal with you, contact the collection agency in writing. If at all possible, try to negotiate a repayment plan on the balance. If you decide to settle the debt, get the terms of the settlement in writing to avoid problems on down the road. Once you have paid the debt, ask for a “release of debt” as proof that the company has agreed that the debt has been satisfied.

The best thing that you can do for yourself is to examine the curcumstances that caused your debt to get to this point and to put a plan in place that will prevent you from ending up there again.

Complaints against debt management companies can occur at any time. Most debt management companies make all efforts to overcome complaints against them. Many debt management companies have complaint clearing sections to deal with the doubts and complaints of clients. Studies reveal that complaints against debt management companies and agencies were skyrocketing in the last decade, but have considerably fallen in recent years.

Credit reporting is one of the major complaints against debt management companies. Many faults can occur in credit reporting. Most of the complaints are against companies that bill themselves as credit counselors. Some companies are guilty of shady services.

Studies regarding complaints against debt management companies by the Office of Fair Trading (OFT) have concluded that most of the complaints occur in three areas. They are unawareness that the lower monthly payments will normally result in an increase in the size of the amount to be repaid, misleading claims and failure in giving sufficient prominence to the warnings. Almost half the states in the Unites States have adopted some kind of licensing requirements for all debt management companies. But nonprofit agencies are excluded from these requirements. They charge high fees from the clients and are irresponsible in their duties. This leads to increasing complaints against debt management companies.

There are many fraudulent companies with shady operators, who make attractive offers but cheat people in the end. By the time customers become aware of these shady deals, the vendors might have disappeared from the scene. A few fake debt management companies accept money from debtors, but do not pay off correctly to creditors. Debtors may not know of it until the creditors call them and demand the missed payments. This will also lower the debtor?s credit score. Such cases occur frequently and many Americans are unsatisfied with most of the deals. The consequence is that more and more people are now walking away from debt counseling and management companies.

Want to know how to eliminate credit card debt legally? Easy.

Pay off the balance.
OK. All joking aside, I think it’s pretty obvious how to eliminate this debt legally. But when you involve multiple cards, different balances, and various interest rates, it can get a little confusing on what approach to take. We recommend these steps:

1. Do not close any credit card accounts!
Closing your credit card accounts can hurt your fico score…and quite dramatically. When you close an account, you lose all the credit history behind that card. No credit history is only slightly better than bad credit history.

Keep all major credit card accounts open so you can rebuild your credit. However, an exception to the rule is to close all retail account cards (i.e. Best Buy, Victoria Secret, Sears, etc.). This will actually help your credit.

2. Cut up all cards but two credit cards.
Ensure that the two cards you have intact are major credit cards (i.e. American Express, Visa, MasterCard, Discover, etc.) From now on, all future charges are to be made only on these two cards. Every month, pay off the monthly activity on your primary cards in addition to the minimum monthly payment. This gets you into the good habit of paying off the monthly activity.

Which cards you choose for your primary charges is up to you. You can base it on interest rate, rewards, vendor acceptance, or any other factors.

Now, if you cut your other cards, be sure to have the account information on hand somewhere else. (You really don’t have to cut them up…unless it just makes you feel better.)

3. Focus on the card with the highest minimum monthly payment.
Dave Ramsey says focus on the card with the lowest balance and pay it off first. Others say to focus on the card with the highest interest rate.

But remember, the name of the game is cashflow. So, I suggest focusing on the card that has the highest minimum monthly payment. I think it’s best to put your attention on the card that is affecting you the most in your monthly cashflow. Get rid of the liability that’s taking the most money from your pocket.

4. Find $100-$200.
Now, I don’t mean go look for loose change in your couch. Find $100-$200 in your budget (or adjust your budget to make it available) and put it towards the card with the highest minimum monthly payment found in step 3. This is to accelerate paying off this credit card. But don’t forget about the other cards. Continue paying just the minimum balance on them.

Of course, if you can always put more towards the payment. The more the better.

5. Lather, rinse, repeat.
Once you have paid off the card with the highest minimum monthly payment, you’ve just learned how to eliminate credit card debt legally.

Now, move onto the next card that has the highest minimum monthly payment. To that card’s payment, add the amount that you were paying on the previous card. Repeat this process each time a card is paid off. This is often referred to as the snowball technique.

6. Pat yourself on the back.
Be patient for this can be a long process. Celebrate each time you accomplish paying off a credit card. Whether it be a pat on the back or a nice dinner, congratulate yourself because working to eliminate credit card debt legally isn’t easy.

Remember, once you’re done, do not close any credit card accounts!

Part of developing your millionaire mindset is taking accountability. If you got yourself into consumer debt, you should be the one to work to get yourself out.

Believe you are able to do it. Once it happens, you have developed the discipline, focus, and energy to achieve greater goals. How about financial freedom?

Do you struggle to pay your bills on time? Do you owe thousands of dollars in credit card debt? If so, you are not alone; debt in the United States has become a widespread epidemic and seems to only be getting worse. In fact, 40% of American families spend more than they earn, according to the Federal Reserve Bank. And while there are conflicting reports of exactly how much consumer debt there is in the U.S., it is unquestionably in the trillions of dollars.

If you are struggling with debt and financial predicaments, there are ways to deal with it and eventually attain financial freedom. From debt consolidation to credit counseling, there is a solution that fits your financial situation.

Where to Seek Help

Knowing where to go for debt assistance is the first step. One of the best resources is public credit counselors who work for non-profit agencies because they charge low fees to help negotiate your debt with your creditors. Typically they will make arrangements and form a payment plan that enables you to pay off your debts. This will not only help you get out of debt but essentially save you thousands of dollars in interest.

When selecting a credit counselor, make sure they are accredited by the National Foundation for Credit Counseling (NFCC), have been trained in money management, and beware of any “fees” you will be required to pay – you don’t want to go in debt any further than absolutely necessary.

Make a Budget

One of the most important factors in getting out of debt is learning how to properly manage your budget. Before you meet with a collector, make a detailed list of all your monthly expenses so you know precisely what your fixed costs are. It’ll also give you an idea of how much you realistically can afford to put towards your debt monthly. Your credit counselor should be able to help you develop a budget that works for you.

Credit Card

Get rid of your credit cards! You will never get out of debt if you keep accumulating it. If you must keep a one or two (which is a good idea in case of an emergency such as illness or job loss), do not carry around it with you and keep it tucked away somewhere safe at home so you will not be tempted to use it.

Bankruptcy

Bankruptcy should be an absolute last resort. The purpose of working with a credit counselor is to explore all your options to get out of debt and steer clear of bankruptcy.

Responsible Debt

Responsible debt refers to debt that is essentially unavoidable, such as a mortgage or tuition for education. However, there are ways to eliminate even necessary debt. There are early mortgage pay plans offered by companies such as United First Financial and when applying for student loans, make sure they are government subsidized because they have very little, if any, interest.

Today’s lifestyle often requires that people obtain credit, in order to live the lifestyle they want to. However, debt can easily sneak up on you and become a problem. If you are currently swimming in debt, you may be looking for a way out. This is where debt management may be the solution.

A debt management program can help you map out a plan to get your finances under control. But before you choose a debt management company, make sure that you are working with someone who knows exactly what they are doing. It is important that you find an agency that will work well for you and for your financial situation.

Range of Services of Debt Management Companies

Reputable debt management services employ credit counselors who are certified in consumer credit and money management and have taken certification courses and tests through the AICCCA or the NFCC accreditation. Those credit counseling agencies that are nonprofit provide debt management counseling and budgeting for free.

Another way an agency can assist you is to help negotiate your current interest rates with your creditors through a debt management plans. Often times, creditors are more than willing to work with a credit management company to lower your interest rates, thereby helping you pay off your debt in a timelier manner.

If there is a need to eventually file bankruptcy, they will walk you through the entire process. In some states, debt counseling is required before a person can file bankruptcy.

Choosing a Debt Management Company

There are a variety of different debt management companies in the marketplace. Each company offers a unique take on how to help you get out of debt and begin on your new financial path. With the diverse range of services that they offer you will need the following criteria to help compare debt management programs:

A reputable company. There are many companies out there that are simply looking to take your money. Always choose a reputable one to work with when looking to work with a debt management company. Check with the BBB and walk away from companies with an “unsatisfactory record”.

A nonprofit agency. These tend to be the best type of agency, because they often have your best interest in mind. They are not thinking about their profit, but rather ways they can help you relieve your debt worries. Keep in mind, however, that a “nonprofit” entity doesn’t always offer either better or cheaper service than a “for profit” agency.

Keep your information confidential. This is important for two main reasons. The first one is for security purposes and the second is for your privacy. Chances are you don’t want your neighbors knowing about your financial troubles. Likewise, any information you give to a debt management company is very sensitive and should be handled as such.

All too often, debt can overtake your life. However, with the help of a good debt management program, you can easily get back on the right track. Just do your homework to choose a reputable company. Before long, your financial troubles will be a thing of the past.

Out of Debt – Is it possible in today’s society to live a life that is debt free? A cash only existence? It’s almost a foreign concept in 2006. Yes, there are programs to help you get out of debt but often people consider it a temporary fix rather than a way of life. Personal debt is a BURDEN. Finding a way out of debt and staying debt free can only improve your life. Your self esteem is built on life successes. With each call from a debt collector, your self esteem takes a major nosedive. Honestly, to feel better about yourself and your circumstances – make it a priority to get out of debt.

There is an interesting phenomenon that happens when we find ourselves in debt. We can blame the economy, the government, our spouses and our job BUT, living a life within our means is always an option. Often times, we have used credit cards and loans to give us the things in life that we believe will make us HAPPY but when we realize just much debt we owe, we become depressed. How can we enjoy the things we have if we have to worry about paying for them? Getting out of debt once and for all will boost our self confidence and make life more enjoyable.

Okay, it seems like a tall order to say – Get out of debt. Take control of your personal debt and start on the path to debt free living. Easy for me to say. Actually, no it’s not!

I do know that when my bills are paid and debt is paid off, I DO feel better about myself. I feel in charge, empowered, efficient. My self esteem is boosted because I don’t have to spend time talking to bill collectors explaining WHY I didn’t send in my payment. I don’t have to recount all the reasons why my life is so hard that I can’t pay my bills. Instead of deflecting debt issues, face them squarely and take control.

Give your self esteem a shot in the arm – set up a plan to get out of debt then actually do it! It’s better to have a debt management plan that needs revising when things go wrong than it is to fly by the seat of your pants and default on loans, credit cards and mortgages. Depression and low self esteem loom down the road if you don’t do the best thing for YOU (not just your creditors) and learn how to get out of debt today!