Consumer Reports: Digging out of debt with consolidation services
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For many families, credit card debt is a huge source of stress, and when the bills keep piling up, it might seem like there’s no way out. But before you lose hope, you may qualify for debt consolidation. Consumer Reports breaks down how it works, how it helps families, and what to know before you sign up.
Before you look into consolidating your debt, keep in mind that many people eager to get out of debt are being targeted by scams, which can make a tough situation even worse. Be careful with companies that communicate to you out of the blue, pressure you into making a quick decision, or even ask for money up front. Legitimate debt relief agencies don’t do that.
By law, if they sell debt services over the phone, they’re not allowed to charge you upfront before lowering or settling your debt. Consumer Reports says legitimate agencies will explain the fees clearly and won’t pressure you into anything.
To find a reputable service, head to the National Foundation for Credit Counseling. It’s a trusted resource for accredited agencies nationwide. If you decide to move forward with a plan, here’s how it usually works.
The program combines your payments into one monthly bill, often at a significantly lower interest rate, and gives you a clear timeline - usually three to five years - to pay it off.
Money Management International estimates that someone with around $23,000 in credit card debt could save over $48,000 in interest with a debt management plan and pay off the debt much faster.
Starting a debt management plan could cause your credit score to drop at first, because it might require that you close some or all of your credit cards. But over time, as you make steady payments, your score should go up.
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