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The best way to handle any debt is to be able to pay it off without any help. Sometimes that just can’t happen. Making minimum payments can sometimes be a challenge if your situation changes.

Consolidating debt is an option for people who can’t make payments. You could do this alone by putting all you debt on a low interest credit card or get a home equity loan. There are also credit counseling services available as an option.

How Does Credit Counseling Work?

With credit counseling, you work with the creditors for a lower interest or payments. Late and over-the limit fees are often forgiven. The client sends just one single payment monthly to the credit counseling agency to be distributed to the creditors.

The Pros

A credit card counselor can usually negotiate a lower rate or payment if you can’t. You will be able to pay off your debt faster with the money you save. You can also plan a budget to repay your debt and also still have some money left for other things if the counselor helps you.

The cons

Sometime the monthly payment may be too high for the client to pay. Creditors will only negotiate so much and sometimes the deal they offer may still be too much to handle. If this happens you may have to find an alternative plan to repay your debt or consider bankruptcy.

Credit counseling services charge fees that are added to your monthly amount. If they don’t do this they will usually obtain the money from your debtors as a part of your payment.

There is some debate as to how going through credit counseling affects your credit. It is noted on your credit report. In most cases, you can’t get new credit until you complete the program. But it could also affect you after your debts are paid off. Many lenders consider credit counseling as being similar to Chapter 13 bankruptcy.

And finally, it is imperative to check out any credit counseling agency that you are considering. Just like any other business, there are some that are not trustworthy. The Better Business Bureau is a good source of information on credit counseling agencies.

It’s important to weigh the pros and cons of credit counseling. You may not need to involve another party if you just take the time to work with your creditors first.