What is Debt Consolidation Management?
Debt consolidation management is the process of managing consumer debt by combining borrower accounts whenever possible. If the accounts cannot be combined, there may be a way to pool the debts so that the bills are paid collectively. Debt consolidation management is often done by credit counseling agencies as a way to help those in difficult situations. Other lenders may also promote the practice as a way to get new accounts, often worth significant sums of money.
Consumer credit counseling services are one of the most popular providers of debt consolidation management. They offer their services for a nominal cost, or possibly free for the consumer, depending on the situation. They also have no stake in seeing the borrower go further into debt. Therefore, these agencies tend to suggest ways of helping clients other than taking out a consolidation loan.
Often, a consolidation loan is of no benefit to a consumer seeking debt consolidation management. They often do not have the credit rating to get a favorable interest rate, if they can get approved for the loan at all. Therefore, the consumer credit counseling service will offer other alternatives. The service will often come up with a strategy by which it will accept a check from the borrower, then distribute the money to creditors. This serves the same function as a debt consolidation loan. Further, the service is often able to renegotiate more favorable terms for the borrower, a key strategy with most forms of debt consolidation management.
Another benefit of debt consolidation management through a consumer credit counseling service is the help the agency gives in planning a budget. A credit counselor will sit down and look at a family’s expenses versus income, and plan a budget accordingly. This could help stop future situations where debt gets to the point of being unmanageable.
For those who want to consolidate debt through a loan and would qualify, this is also an option. The most common way to do this is through home equity loans. This makes the loan a secured investment for the lender, thus often leading to more favorable terms than unsecured loans will provide. A number of loans could be paid off this way, leading to the borrower only having to worry about paying on one account.
Those employing this strategy for debt consolidation management need to be disciplined, however. Often, this strategy will immediately free up revolving credit lines. For those who fear they may immediately start using those revolving lines of credit and create more debt, this strategy is very risky. Many who employ this strategy will choose to close those revolving accounts in order to avoid the temptation.
Written by Ken Black
