Alternatives to Debt Consolidation and Counseling

Debt consolidation loans are one of the most popular debt solutions, but it’s not always the best option. While these loans provide you with the potential to decrease your interest rate, minimize the number of payments, and save money in the long run, they might also be detrimental to your credit. 

Taking out yet another loan might not be ideal. If you’re looking to get out of debt, consider one of these 6 alternatives to debt consolidation:

1. Create a Strict Budget

Before you move forward with debt consolidation, make sure you do everything in your power to manage your debt on your own first. The first step in taking control of your debt is creating a strict budget and sticking to it. 

There are many free budgeting tools and calculators available to ensure that you have what you need to get started. The most important aspect of budgeting is to first start by tracking your expenses. This means you have to track everything from your consistent monthly bills to the two-dollar coffee runs. 

Take our budgeting quiz to test your knowledge. Then, work through our Creating a Budget 101 course to ensure you’re ready to tackle your debt to the best of your ability. 

2. Call and Communicate With Your Creditors

Creditors may be able to offer some concessions if you call them and express concern about repaying your debts. They may be willing to lower your minimum monthly payment to help you avoid missing a payment. Some creditors even refer their customers to credit counseling if they think it is necessary. 

While it can be a good idea to reach out to your creditors if you are facing financial difficulties, they can only help you with one account. Debt counseling looks at your entire fiscal picture, all of your debts and expenses, and helps you come up with a solution for every aspect of your financial life.

Learn More: What to do if a Debt Collector Calls You

3. Consider Options With Your Mortgage and Other Payments

If you are concerned about being able to repay your mortgage, you should talk to the loss mitigation department of your mortgage lender. Because mortgage debt is so much larger than typical revolving debts, they make every effort to work out solutions with their borrowers.

Any responsible loss mitigation specialist will probably refer you to HUD-approved housing counseling. Even while receiving HUD housing counseling, it’s good to keep the lines of communication open with your lender.

You may also have options with some of your other payments as well. 

Learn More: How to Skip or Defer a Car Payment

4. Find a Free Credit Coaching Program

Credit coaching is a free service through credit.org that provides you with the debt and credit advice you need. A credit coach can help you negotiate with your creditors and consolidate your debts in a way that fits your financial situation. 

There are no strings attached; these coaches dedicate their time to educate you on your personalized plan. Contact a credit coach free today! 

Get Started. It’s Free.

5. Apply for a Debt Consolidation Loan

Any consumer who is facing overwhelming debts will be unlikely to be approved for a debt consolidation loan, but some services offered by debt counselors include consolidated monthly debt payments, which confers the advantages of debt consolidation along with the benefits that come from professional counseling services. 

Even those consumers who are able to get a consolidation loan or consolidate their debts through balance transfers could benefit from a free debt counseling session. Because debt consolidation doesn’t allow for the financial education and assistance a coach provides, it’s a good idea to talk to one either way.

More Resources: Personal Finance Education and Free Online Courses

6. Carefully Consider Debt Settlement

A debt settlement is when a borrower settles a debt for less than the full amount owed. The lender must agree to accept less than the full amount, and this arrangement is indicated on the borrower’s credit record. Usually, people use the services of a professional debt settlement negotiator; in some rare cases, this negotiator may also be certified as a debt counselor. 

Before you commit to a debt settlement, it’s important to understand your other options and educate yourself on the pros and cons. 

Learn More: Debt Settlement

Don’t Navigate Through Debt Alone

Whether you’re dealing with minor credit card debt or facing bankruptcy, it’s important to consider all of your options before moving forward. Don’t navigate your options alone. Contact one of our financial coaches for free today and take charge of your debt!

Get Started. It’s Free.