Do you find yourself struggling to keep up with debt payments? If so, debt management and debt consolidation are two debt solutions that may be able to help. The first step you may take is to learn more at Achieve about debt management and debt consolidation to figure out which debt solution is best for your situation.
By understanding how each works, you can decide which path is the best for your situation. They both have their pros and cons, so it’s important to understand the differences between them and the best way to figure out how each can help you resolve debt issues.
In this article, we will look at debt management vs. debt consolidation and debt management options, how they work, and when you should consider each one.
What is Debt Management?
Debt Management is a debt solution that helps you better manage debt payments without taking on new debt. The history of debt management dates back to debt counselors in the 1970s, who developed debt management plans (DMPs) with creditors.
A debt management plan is a form of debt relief that involves renegotiating the terms of debt – such as interest rates and monthly payments – with your creditors. This process often includes working with credit counseling agencies or debt settlement companies to help you negotiate with creditors.
How Does Debt Management Work?
When it comes to debt management, the process begins with an assessment of your debt obligations and financial situation. After assessing your debt and exploring debt relief options, a debt counselor will create a debt management plan that outlines the terms of debt repayment between you and your creditors.
This includes setting up a debt repayment plan and negotiating lower interest rates and monthly payments helping you save money and pay off debt faster. The objective here is to reduce debt and become debt free by making a single debt payment each month that is more manageable.
The working relationship between debt relief companies and creditors is key, as it allows debt relief companies to negotiate lower interest rates while protecting the consumer from aggressive debt collection tactics.
What is Debt Consolidation?
Debt consolidation on the other hand, is the debt solutions of combining multiple payments into one payment. This debt relief strategy involves taking out a debt consolidation loan from a bank, credit union, or debt relief company.
The debt consolidation loan pays off all of your existing debt and replaces it with one new debt payment. This can help simplify debt payments by consolidating multiple accounts into one — but debt consolidation comes with its own set of risks that need to be considered.
The objective is usually to get out of debt faster by reducing monthly payments thanks to the lower interest rate. Debt consolidation also helps you avoid debt management altogether, as debt consolidation involves taking on a loan to pay off debt.
Which Debt Relief Solution is Best for You?
The debt relief solution that works best for you depends on your situation and goals. If debt has become too hard to manage, debt management may be the best choice as debt resolution companies will work with creditors to lower interest rates so debt payments become more manageable.
If a debt is too expensive, debt consolidation may be the best option as debt consolidation loans usually come with a lower interest rate — but do not forget to go through the details of each loan carefully, and factor in all costs associated with it.
In addition, to figure out which debt relief solution works best for you, it’s always good to review your debt relief options with a debt resolution specialist who can provide the necessary guidance and determine a debt relief plan that fits your needs. Your credit counselor will review your debt relief options, and provide debt advice and debt resolution strategies to get out of debt — for good.
Debt management and debt consolidation are two debt solutions that offer debt relief in different ways. Knowing which one is best for you will depend on your debt situation and goals.
To ensure that you’re making the right debt resolution decision — it’s important to review debt management vs debt consolidation options at your disposal with a debt resolution specialist first. With help from a debt counselor, you can get debt advice and create a debt relief plan tailored to your individual needs.