Debt Consolidation USA Discusses Debt Relief Options As US Credit Card Debt Increases

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Q2 2012 reports from TransUnion Corp show that the average credit card debt among U.S. card holders has risen by six per cent over the last year. Debt Consolidation USA offers valuable advice on handling debts and cites the fundamental differences between two commonly used methods for handling debt.

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Debt settlement is unique in that it is the only program that will actually reduce your debts – you could end up paying only a fraction of what you owe... Your monthly payment will be much lower than the total minimum monthly payments you have now.

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Credit information company TransUnion Corp has just released data from their analysis of consumer credit data for the second quarter of 2012. The report shows that U.S. borrowers’ average credit card debt in Q2 2012 is valued at $4,971, an amount that is six per cent higher than Q2 2011’s average debt of $4,699. Although TransUnion Corp reports that this amount is still substantially lower than 2009’s average debt of $5,719, financial institutions warn that irresponsible credit usage can easily lead card holders to incur more debt. Debt Consolidation USA, the country’s leading information and referral source for debt management and credit counseling, believes that borrowers can avoid panic-driven financial decisions by learning about various debt relief options in the face of mounting liabilities.

According to company representatives, two of the most commonly used debt management methods include debt consolidation and credit counseling. These two strategies come with their own set of pros and cons, making it imperative for debtors to differentiate between the two.

Credit counseling entails working with experts from credit counseling agencies, most of which are non-profit groups providing free services. Credit counselors will evaluate the debtor’s finances and help them formulate a payment plan which usually spans five years. Credit counselors will also negotiate with creditors to reduce interest rates and consolidate all unsecured debts into one monthly payment. The whole process is commonly referred to as a debt management plan or DMP.

Debt consolidation follows a similar procedure where debtors work with an expert in creating a plan. Debt settlement providers will then negotiate with creditors to reduce both debts and interest rates — the only debt relief option known to do so:

“Debt settlement is unique in that it is the only program that will actually reduce your debts – you could end up paying only a fraction of what you owe. This means your monthly payment will be much lower than the total minimum monthly payments you have now,” assert speakers from Debt Consolidation USA.

In addition to reducing the principal balance and interest rates, debt settlements also differ from credit counseling in two ways: the amount of time to become debt-free and the method of payment for credit card debts.

“Credit counseling or DMPs can help you become debt-free in five years. In contrast, debt settlement can help you pay off all your debt in just 24 to 48 months because it has helped cut your debts drastically,” explain experts from Debt Consolidation USA.

“With regard to payment, a credit counseling service will negotiate a payment plan with your creditors but it will still be up to you to make your monthly payments. With debt settlement, you only pay your creditors when you have reached a settlement and deposit the money into a trust account that’s set up by the debt settlement company,” company speakers add.

Both strategies are known to hurt credit scores, but company speakers state that these are far better options than declaring bankruptcy, the negative effects of which on credit scores can haunt debtors for seven to 10 years.

To avoid such a scenario and to mitigate the growing debts of America’s borrowers, Debt Consolidation USA encourages card holders to learn how to budget and save money and seek advice from experts before doing anything drastic.

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Adam Tijerina
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