If you like the idea of consolidating debts to make payments easier but you do not like the idea of getting a loan, you don’t have to throw out this option just yet. There are effective ways to get out of debt through consolidation without the need for a new loan.

While it may work for some people and financial situations, most experts do not think that debt consolidation loans really help at all. Sometimes, you are better off shifting your debts to funnel them into one payment scheme.

There are two ways to achieve debt consolidation without endangering yourself to get deeper into debt, one is through balance transfers and the other is through debt management.

In a balance transfer, you will literally shift you debts to consolidate it into one account. You have two options in accomplishing this debt relief feat. The first is choosing an existing credit card (ideally one with the lowest interest rate) and transferring the balance of the high interest rate card there. There are credit companies who allow this so it doesn’t hurt to ask if you can apply it to your account.

The other option is to get a 0% interest card and transferring your balances there. This option will require you to pay off balance transfer fees. However, you will enjoy at least 6 months of paying only for the principal amount of your debt. Afterwhich, the interest rate will skyrocket. Given that, you need to prepare a payment plan to take advantage of the 6 months of zero interest.

The other option is debt management. It is a type of debt relief program that requires you to enrol in a program that will help you lower your monthly payments. You will work with a credit counselor who will assist you in making a debt management plan. Also known as a DMP, the plan will help you by putting you on a payment regimen to guide you as you pay off your debts. Debtors enrolled in this type of debt relief will be making one payment to the credit counseling agency, who in turn will send it to the different creditors that they have.

In this debt relief, the credit counselor will analyze the personal finances of the debtor and also the gravity of their debt problem. They will analyze just how capable the debtor is of paying them off. They can assist in lowering the interest rates of the current debt and also the waiving off of certain fees and penalty charges. While it can lower your monthly payments, it will not be very significant. If you need more reduction, you may want to opt for another form of debt relief - which is debt settlement.

In truth, debt settlement is like debt consolidation. However, the significant reduction on the outstanding balance merits a whole category of its own.

A debt settlement or debt reduction program involves negotiating with the creditor to allow the debtor to pay for a certain percentage of their outstanding balance. That is called the settlement amount. The creditor and the debtor (or a debt settlement expert) will haggle back and forth until they reach an agreement that they can both accept. It can range between 30%-80% of the balance. When the debtor finishes the payment on this new amount, the rest of the debt will be forgiven.

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