The major difference between Consumer Credit Counseling Services and Debt Consolidation Companies is that with CCCS, creditors commonly pay fees to CCCS because they would rather get some money on your debt, than run the risk of receiving nothing. You may be charged a nominal monthly fee of anywhere from $5 to $45 for CCCS to administer your Debt Management Plan.
With Debt Consolidation Companies you may pay all the fees for their services. This isn’t necessarily a bad thing so long as the fees are reasonable, and spread out over a period of time. The single biggest advantage to using a Debt Consolidation Service is they are working for you, not your creditors. Many debt consolidation companies are still non-profit when you use them because they base their fees on their actual expenses and do not make any profit on the services they provide.
Occasionally debt consolidation companies may require an up front fee from you, or include service fees in the payment plan. Service fees aren’t necessarily bad, so long as you know how much they are. We don’t like large up front, advance, or excessive fees at all. Considering you wouldn’t be going through them if you had extra money, don’t pay large up front, advance or excessive fees!
Reputable online Debt Consolidation Services charge a reasonable entry fee of less than $75, and then a monthly administrative fee based upon either a flat fee per debt account, or a percentage of total debt in the management program, the same way a Consumer Credit Counseling Agency does. So long as they outline what your fees will be, and they are reasonable (as shown here), then you can decide whether or not enrolling in their program is right for you.
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Most debt consolidation companies won’t reduce your principal balance. There are some that may be able to negotiate a reduction of the balance you owe on your debt if they also offer debt settlement services. Interest, creditor fees, and aggregate monthly payment, are the usual reductions when you consolidate debts.
The other major difference between Debt Consolidation Companies and Credit Counseling Agencies is that Credit Counseling Agencies will provide counseling services to not only help get you out of debt, but keep you out.
Credit Recovery After Debt Consolidation
Using debt consolidation services is a well-recognized and acceptable path to get out of debt today. Creditors prefer debt consolidation instead of bankruptcy. If you file bankruptcy, unsecured creditors rarely receive any of the money you owe.
Creditors like to see that you made the effort to repay your debts. This means credit recovery may be quicker with Debt Consolidation / Consumer Credit Counseling Services than other debt relief options.
Once you have successfully completed your repayment plan, ask your debt counselor to place a successful completion notice in your credit file.
You may also want to consider recommended credit repair methods to get your credit file back in shape.
Consumer Credit Counseling Services and Debt Consolidation Companies are very similar and the number one recommended way to obtain immediate debt relief. As you can see, making a decision about how to take advantage of debt consolidation can be confusing and frustrating.
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