Many people get into debt because they can’t afford to make monthly debt payments on top of paying for daily living expenses. If you’re not sure of the best way to handle your debt, a credit counselor can also help you explore your options.

You may see many advertisements for these debt consolidation options:
•    Nonprofit credit counseling
•    Paying back your debt through a debt repayment plan
•    Transferring debt to a zero or low-interest credit card
•    Taking out a debt consolidation loan
•    Taking out a home equity loan

Learn more about the advantages and risks of each of these different ways to consolidate debt to avoid getting into more trouble.

Warning: There are many companies that advertise for debt consolidation services, however many may actually be debt settlement companies. A debt settlement company may try to convince you to stop paying your debts and instead pay into a special account. The company will then use this money to attempt to negotiate with creditors to reduce the amount of principal you pay off.

Debt settlement is risky for several reasons:

• Not paying creditors will show up as a negative transaction on your credit report. This could make it harder for you to take out other credit.
• If you don’t pay your debt, your creditors might hire debt collection agencies to collect your debt. This could lead to a lawsuit.
• While you don’t pay your debts under a debt settlement plan, interest and penalty fees will be added to the amount you owe. So, even if your creditor (such as your credit card company) agrees to accept something less than the full amount you owe, that amount might have grown anyway because of interest and penalty fees.