If you have a lot of credit card debt or other types of debt, there are two very common ways to eliminate your debt: consumer credit counseling or personal bankruptcy.

Personal bankruptcy may be an option for you, but there are a number of disadvantages to personal bankruptcy.

First, no-one wants to go bankrupt. Second, with a bankruptcy on your credit report it may be more difficult to borrow in the future. Third, there are costs associated with bankruptcy, including legal fees.

For those reasons, many people use credit counseling as a way to avoid bankruptcy. People go bankrupt to stop their creditors from calling, and to prevent legal action. Credit counseling can accomplish the same objective.

Your credit counselor will put you on a Debt Management Program where you make one payment each month to deal with your debts. Once the payment plan is in place, your creditors are no longer calling or threatening you, so credit counseling becomes a great strategy to avoid bankruptcy.

There are two obvious reasons why credit card debt is so dangerous.
First, credits cards are easy to get, so most people have more credit cards than they need.  The more credit cards you have, the more you spend, and obviously that is very dangerous.
The second obvious problem with credit cards is that they typically charge a very high interest rate, often two or three times as much as a regular bank loan.  If you don’t pay off your balance in full each month, you will pay a high rate of interest, which means it will take you a long time to eliminate your credit card debt.
If you carry a balance each month on more than one credit card, make an appointment for credit counseling so that you can deal with your credit card debt.

When you meet with a credit counselor they will start the consumer credit counseling process by explaining your options for dealing with your debt.  One of the options to consider is debt consolidation.  Here’s what you need to know.

First, the good: a debt consolidation loan is used to combine the payments for many debts into one payment, so you only have one payment to remember each month.  As an added benefit, the interest rate on a debt consolidation loan should be lower than the interest rate you are paying on your credit card debt and other high interest debt you are consolidating.

The bad: you may not be able to afford even the new, lower payments on your debt consolidation loan.  Do a budget first, and don’t agree to anything you can’t afford.

The ugly: there are many debt consolidators that will charge you a fee for doing what you could do yourself, so don’t sign anything until you read it.

Debt consolidation is a great option for many people, but only if you consider your options carefully, and think before you sign anything.