Credit Repair Debt Consolidation. What Do I Need to Know?

Do you have more debt than income? Do your payments add up to more than your income? Are you struggling with money every month? Are credit cards and loan payments eating up all your income? Are you ready to do something about it? If you are considering credit repair debt consolidation then keep reading. Below are some things that you need to know before you begin.

What is the Difference between credit repair and debt consolidation?

Many people assume that credit repair and debt consolidation are the same thing. While consolidating your bills and debt may be one way to repair your credit, it does not actually eliminate your debt. Credit repair is a process of eliminating your debt and or repairing black marks on your credit report. This is the best option for those with bad credit. Repairing your credit can be done on your own or with the help of an outside agency. Debt consolidation requires outside help. If you are looking for credit repair debt consolidation you will need to find a lender to take all your bills and condense them into one. To repair your credit you will have to make the payments as set up by this lender otherwise you will not help it at all.

Repairing your credit can be done several ways. If your credit is bad and you are seriously delinquent in many of your payments, the best option may be to get a copy of your credit report from the credit bureau and begin paying off one thing at a time until everything is paid off. This will slowly begin to reduce your debt and increase your credit score. It is not advisable, however to negotiate with a creditor for a reduced payoff. This does show on your credit as being paid, but not as paid in full. It can be a good option if it is all you can afford to do, but if you can pay all of it, do it. It will be much better for you in the long run to pay in full and it shows up better on your credit report.

The best option is to get a credit counselor to get you set up with credit repair debt consolidation. This is usually done by nonprofit organizations. They will get all your debt together and contact all your creditors for you. They will negotiate lower interest rates and reduced fees that will not reflect negatively on your report. They will put all this together and give you a total debt owed report. Then they break this total down into one monthly payment. You send them the one payment that they evenly disburse to your various creditors. Most of their plans eliminate your debt in 18 months to 3 years, depending on how much you owe and how much you can afford to pay. They will usually ask for a monthly donation to cover their costs, but this donation is not required. With this option, if a bill collector calls you, you can simply refer them to your credit counselor. This option is a lot less stressful, a lot less work, and much easier to stick to. It is the best option for anyone wanting to eliminate their debt.

Debt consolidation is a completely different option. This option uses collateral (usually your home or business) to give you a loan to pay off all your bills. This can be a great option if you can afford the bill. The way it works is you get a loan from the bank for the amount of all your debt and you put up your house as collateral. If you fail to pay or are even late on a payment, the bank has the right to take your house. If you can't afford the payments, or there is a chance you can even be late, DON'T choose this option. If you can afford to pay the payments, this is the quickest way to, not reduce your debt, but reduce the number of bills and monthly payments, and pay off your creditors. You still have the same amount of debt, but only one bill.

These are two different approaches to working with your credit. Both have their benefits. You just have to choose which is best for you.