The differences between credit counseling, debt management and debt consolidation

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For people struggling with credit card debt, there are several debt repayment options offered by different organizations.

Credit Counseling

Credit counseling organizations, usually non-profit, advise you on managing your money and debts, help you develop a budget, and usually offer free educational materials and workshops. Typically, their counselors are certified and trained in the areas of consumer credit, money and debt management, and budgeting. Counselors discuss your entire financial situation with you, and help you develop a personalized plan to solve your money problems. If you are having trouble making payments on your debts a credit counselor may be able to help you with advice or by organizing a “debt management plan” for all your debts.

Debt Management

Debt management is the process in which you manage the repayments of debt. You can create your own debt management plan or have a credit counseling organization assist you with a plan. The words “debt management” tends to be associated with organizations that will manage the repayment of your debts however any form of debt repayment planning can be consider debt management.

Debt Consolidation

A process of combining debts into one loan or repayment plan. Debt consolidation can be done on your own, with a financial institution or through a counseling service. Student loans are often consolidated in order to secure a lower interest rate. Combining the balances of multiple loans into one single loan. Consolidating is often used as a strategy for reducing monthly payments by extending repayment terms and/or acquiring a lower interest rate for some or all of the loan balances.