Online debt consolidation comes in many forms, so it is important that each consumer reflects on what their needs and concerns and financial situation is before signing up for an online debt consolidation program. The four primary concerns for most consumers are: i) monthly payment, ii) time to debt freedom, iii) total cost, and iv) the rating impact of the consolidation program. Be sure to evaluate each program, relative to your prioritization of these factors.

Since there are a variety of online debt consolidation options, including counseling, debt negotiation/debt settlement, a debt consolidation loan, and other debt resolution options, it is important to fully understand each option and then pick the solution that is right for you.

Credit Counseling

Credit counseling, or signing up for a debt management plan, is a very common form of online debt consolidation. There are many companies offering online counseling, which is essentially a way to make one payment directly to the counseling agency, which then distributes that payment to your creditors. Most times, a counseling agency will be able to lower your monthly payments by getting interest rate concessions from your lenders or creditors. It is important to understand that in a counseling program, you are still repaying 100% of your debts – but with lower monthly payments. On average, most online counseling programs take around five years. While most counseling programs do not impact your FICO score, being enrolled in a counseling debt management plan DOES show up on your

credit report… and, unfortunately, many lenders look at enrollment in counseling akin to filing for Chapter 13 Bankruptcy – or using a third part!
y to re-organize your debts.

Debt Settlement

Debt settlement, also called debt negotiation, is a form of online debt consolidation that cuts your total debt, sometimes over 50%, with lower monthly payments. Debt settlement programs typically run around three years. It is important to keep in mind, however, that during the life of your debt settlement program, you are NOT paying your creditors. This means that a debt settlement solution of online debt consolidation will negatively impact your rating. Your rating will not be good, at a minimum, for the term of your debt settlement program. However, debt settlement is usually the fastest and cheapest way to debt freedom, with a low monthly payment, while avoiding Chapter 7 Bankruptcy. The trade-off here is a negative rating versus saving money.

Debt Consolidation Loan

Many people think first of a debt consolidation loan when seeking online debt consolidation. This option typically means a second home loan (or home equity line of credit) or refinancing your primary mortgage. In a debt consolidation loan, you exchange one loan for another. The most frequent form is taking out a mortgage loan, which carries a lower interest rate and is tax deductible, to pay off high interest rate card debt. It is important to be aware that shifting unsecured debt to secured debt can create a volatile situation, if there is ever a chance that you cannot afford the new mortgage payment you are now putting yourself at risk of foreclosure! In the case of a debt consolidation loan, most mortgages are 30 year loan, which means that the total cost and the time to debt freedom could be very high… but the monthly payment will be lower than other options and there is no rating impact.

Net-net: while there are many forms of online debt consolidation, many people with good to perfect who own homes should look into debt consolidation loans, while consumers with high card debt and poor may want to explore debt settlement or debt negotiation. However, each consumer is different, so find the online debt consolidation option that fits for you.

Brad Stroh is currently co-CEO of Freedom Financial Network and http://Bills.com. If you would like more of Brad’s articles, please visit the http://Bills.com information on Credit.