DEBT CONSOLIDATION

Before settling on a debt consolidation loan to get your debt under control you will want to carefully consider the debt consolidation industry.  There are many ads luring individuals to consolidate their debt with them. 

A legitimate debt consolidation loan is not so simple to obtain.  Often this type of loan is sought because people are having problems meeting their monthly debt obligations which have affected their credit standing. 

Be aware of the interest rate of a debt consolidation loan; although the payments may be lower the length of the payments may be longer making the debt increased.

Additionally you may want to avoid the debt consolidation service that promises to take care of everything for you.  You turn in all your debt to them, they negotiate your credit rates and  establish a payment that you can make to them and they divvy it up to your creditors.  This may seem like a good solution; however, they will take a fee out of your monthly payment, the standard is about 10%.  

Essentially, this debt consolidation company has done nothing that you could not have done for yourself and saved yourself the monthly fee.  

Most creditors would rather negotiate with you to receive a payment over the reality of not being paid at all; debt on a credit card can be halted and the interest rate drastically decreased lowering your monthly payments. 

You can establish a payment that you can afford and distribute that money to the separate creditors yourself. 

This is exactly what the debt management consolidation company does and you then can pay yourself that 10% fee.

Debt Management - Consolidate Loans

Finally, one of the most damaging ways to consolidate debt is the balance transfer method.  Low interest balance transfer deals are very common today.  Look at the fine print on these deals, most of the time they last for 3 to 12 months and then the interest rate goes up, sometimes higher than the rate you had previously on the balance you transferred. 

Some people continue this balance transfer each time their interest rate goes up and when looking at their credit report it is evident that instead of reducing their debt they seem to be swinging on vines transferring the balance over and over.  This makes them appear as a credit risk and causes them to be unable to establish a more positive credit outlook.

So what can a person do to get their debt consolidated and under control?  Most people have options that really can help them out their debt problems.  One method is with a home equity loan.  The interest in usually low and the interest you pay is tax deductible.  Refinancing your car is another option. 

The risk you run with this method is the car not lasting until after you pay off the refinancing.  A personal loan is another method of consolidating your debt; however, if you have adversely affected your credit this may not be available to you. 

Negotiate your payments and your interest rates to try to establish a more manageable payment schedule as well.  Negotiating cannot hurt and may just be the solution you need.  Ultimately you need to reassess your budget and stick to it.  This will help you in your current debt situation as well as avoiding future debt.

Debt management companies are there to assist you with decreasing loan payments if you are having problems, they will also advise you on all aspects of debt management. The debt management companies may also advise you on how to consolidate your loans and allow you to pay a smaller amount each month. Ask your advisor for details.