Harrison Funding and Johnson Funding may be running a debt consolidation scam according to multiple personal finance sites. Harrison Funding has begun flooding the market with personal loan, debt consolidation and credit card relief offers in the mail with the website My Harrison Funding. The problem is that the terms and conditions are at the very least confusing, and possibly even suspect.
The interest rates are so low that you would have to have near-perfect credit to be approved for one of their offers. Best 2020 Reviews, the personal finance review site, has issued Harrison Funding Review, Johnson Funding Review, Credit9 Review and others.
Are you facing uncertainty and suffering from a great deal of confusion because of your debt? Do you want to minimize the rate of interest you are currently paying? Or do you want to learn how to eliminate your debt quickly and efficiently? You might want to consider debt consolidation or credit counseling as two of your options.
In this article, we will help you decide whether debt consolidation or credit counseling is the right choice for your financial situation.
If you are unsure about the best way to pay off your debt, you must carefully consider all your options. You can learn more about debt settlement, credit counseling, debt consolidation, debt forgiveness, and credit repair by using resources such as Crixeo.
What Is Credit Counseling and How Does It Work?
When you opt for credit counseling, you will have to speak to a certified credit counselor who will look at your financial situation and then discuss various ways to pay off your debt. A credit counselor will help you gain a wider, objective view of your finances so you can better understand the consequences associated with each way to pay off debt.
You must provide your credit counselor all authentic and relevant details about your financial situation so they can guide you clearly and comprehensively. Information such as how much you earn in a month, how much you owe, the number of assets you have in your possession, etc., are important details that your credit counselor must know.
Your credit counselor will give you many possible suggestions after analyzing your financial situation. They will consider your case and advise regarding:
- Budgeting: An important advice a credit counselor can give you regarding budgeting is where you can cut down. They will break down your monthly income and list all your expenses to determine where budget cuts are possible and how much you can pay off your debt each month.
- Debt management: Debt management entails negotiations in repayment schedules with creditors so you can get a lower interest rate or lower monthly minimum repayments. However, the total amount of debt you will have to pay stays the same. Your credit counselor will act as a mediator during the negotiations. Each month you will need to pay your credit counselor, who will pay your creditors for you. Debt management will not negatively affect your credit history as long as you stick to the terms of the agreement and make payments as due.
- Debt settlement:Debt settlement involves negotiations with your lenders to let you repay a reduced total debt amount. This can affect your credit score adversely. Most creditors have set policies about loan amounts that they can forgive under certain circumstances. Check your options to see if you are eligible for debt settlement.
- Debt consolidation: If you have an excellent credit score, debt consolidation is the best option for you. A bank, credit union or financial institution will lend you money to traditionally pay off your debts.
- Bankruptcy: When all other options have failed, a credit counselor will suggest you declare bankruptcy as a last resort.
Some credit counselors charge a few for their services. Others, like those who work as representatives for the National Foundation for Credit Counseling, will take your case for a very low few or as pro bono work. You must be aware whether your credit counselor will receive compensation for any advice they give you and if any of the options you choose from the above will result in higher compensation for them. Doing so will help you determine whether the credit counselor is working in your best interests and not their own.
Let’s take a look at some benefits as well as disadvantages of opting for a debt management program via a credit counseling agency:
- You can qualify for debt management even with a poor credit score.
- Debt management can help you receive valuable financial coaching that can help you make better decisions in the future.
- Credit counseling agencies can help you gain lower interest rates, especially from credit card companies, so you can discuss convenient monthly payments based on what you earn.
- Unlike debt consolidation, you don’t need to opt for another loan or open another line of credit to pay off your existing loans.
- A debt management arrangement will have certain conditions like canceling all credit card subscriptions (except one which will be used for emergencies). Doing so will decrease your available credit and can affect your credit score adversely. However, once you start paying off your balances, your score will improve.
- If you are still unable to pay off your debt after a debt management agreement, the settlement that your credit counselor had negotiated with your creditor will automatically dissolve.
Personal Loan for Debt Consolidation: What Is It and How Does It Work?
When you take a personal loan for debt consolidation, you are consolidating your debt. While this process does give you an additional loan, doing so can also minimize the number of payments you have to make each month. When done right, debt consolidation will enable you to concentrate on paying off just one loan, thereby reducing the amount you pay in interest.
Repaying the consolidation loan will cost you lessthan repaying each of your debts individually if you qualify for a consolidation loan at a lower interest rate than your current debts. In most cases, people consolidate high interest, unsecured debts like credit card debt and payday loans.
There are two options that are commonly used by people for debt consolidation:
- A credit card with a 0% annual percentage rate (APR) on balance transfers: A credit card with 0% APR will allow you to repay all your debt with no interest! However, the downside is that such interest-free offers last for a few months only (not more than two years). If you cannot pay off the debt during these months, you will need to find another offer to pay the debts with interest at the standard rate.
In some cases, a balance transfer fee of 5% might also be charged if you use an interest-free credit card to pay off your debt.
- Personal loan: In most cases, you will need to repay the personal loan between 1 and 7 years. This may seem like an overwhelming task but paying off such a debt that has a fixed time frame is usually more effective than a line of credit towards which you have to make monthly minimum payments.
The interest rate on a personal loan can lie anywhere between 5% and 36%, but lesser than 10% is pretty uncommon. Even people with an excellent credit score do not receive an interest rate lower than 10%.
Let’s take a look at the pros and cons of taking a debt consolidation loan:
- You will be able to use your credit cards while paying off the loan.
- The interest rate on the consolidation loan will most likely be lower than interest on individual debts.
- A consolidation loan will provide you with a lump sum that will allow you to pay off all existing debts at once.
- There is usually a borrowing fee attached to consolidation loans.
- You won’t be able to appoint credit counseling agencies to negotiate with your creditors on your behalf.
- Late fees and penalties might be added to your account if you fail to make payments towards the consolidation loan on time.
- If you have a poor credit score, your consolidation loan might have a high interest rate, or you might not qualify for one at all.
- A consolidation loan is just another loan added to your line of credit and will impact your credit score adversely.
Which One Should You Choose Between Debt Consolidation and Credit Counseling?
If your credit counselor is knowledgeable and possesses the required expertise, they will be able to help you if you:
- Are intimidated by financial information and related issues.
- Cannot make minimum monthly payments.
- Have no idea about budgeting.
- Struggle to manage your finances in general (other than existing debt).
A competent credit counselor will help you address your debt issue and give you the motivation and knowledge you need for successful future financial planning. They might suggest you take part in credit counseling and financial education programs in return for debt management approval.
Debt consolidation is an apparent choice for people who know they can repay their debts but at a lower interest rate. You might have numerous credit card bills that you would want to consolidate into one personal loan with a much lower interest rate. This will not only make you debt-free sooner but will also save you money.
You Might Need Both!
Credit counseling and debt consolidation go hand in hand. Sometimes credit counseling can help you realize that debt consolidation is the best option for you. Paying off debt requires discipline and hard work. Credit counseling offers you a roadmap toward becoming debt-free, helps you get better insights about your financial situation and provides tools for you to budget effectively.
In the end, the decision lies in your hands. Do you consider yourself motivated enough to pay off your debt? Will you be able to make lifestyle changes to face your financial situation? You must weigh all your options and compare them before making the final decision. You must ensure that you thoroughly understand the interest rates and terms of any loan that you take. After choosing, stick to your plan. You will soon become debt-free.