Debt Consolidation and Credit Counseling

Meeting the Qualifications: Not Everyone is Approved

Not everyone out there can saunter into their bank and apply for a debt consolidation loan to pay off high-interest credit card debt. Unfortunately, many borrowers who owe on their credit cards do not meet the requirements for debt consolidation funding.  People who can’t secure the loan typically haven’t been on the job long enough (at least a year) or you do not have sufficient collateral or income to cover the debt.

Credit Counseling: A Last Resort type of Option

In such a case, you may have to opt for credit counseling. While it may not enhance your credit report, it certainly is better option than bankruptcy which stays on your report for a decade. When you choose credit counseling instead of a debt consolidation loan, a debt management plan is established which is approved by your creditors. Creditors typically sanction the plan as they know credit counseling is an action of last resort before one is forced to file bankruptcy.

Making the Best of a Bad Situation

After all, they reason it’s better to receive a negotiated amount than no payment at all, which would happen if you would file bankruptcy. If you don’t have the means to pay off your current credit card debt in a timespan of three years and you can’t obtain a debt consolidation loan, then credit counseling is usually the only alternative open to you besides filing bankruptcy.

Better than Bankruptcy

However, keep in mind, that the fact you had to negotiate your obligations with your creditors will still be highlighted on your credit report. Therefore, you may find it difficult to obtain credit or funding for a loan at a future date. Nevertheless, if you don’t meet the requirements for a debt consolidation loan, a debt management plan is still a more reasonable choice then learning how to manage your money by way of bankruptcy.

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