Debt Consolidation Options Can Help You Fight Your Way Back to Financial Health


Is debt ruining your life? Are you unable to make the payments on your loans and credit cards? Afraid you're going to sink under the weight of it all? There are many options available that will help you fight off this particular monster. Moreover, most of these debt consolidation options you can do yourself.

Debt is a fact of life for many Americans, especially in tough economic times. We borrow to meet the expenses of daily living, then we borrow to service the debt we've accrued. If we're not careful, we find ourselves surrounded on all sides by debt, and we don't know where to turn. However, there are things you can do.

First, call all your creditors, explain the situation, and see if they will reduce your interest rates. It may sound weird, when the news is all about creditors raising interest rates, but most companies would rather have you pay your balance than see you default. All you have to do is ask. Many companies allow their front-line customer service representatives to make the decision so you don?t even need to talk to a supervisor. Tell them you?re working on debt consolidation.

Next, take a long hard look at what you owe. Make a list of everything you have to pay off and the interest rates you're paying for each account. The first step in debt consolidation is to treat all these debts as one big debt. But what you are going to do is called the "snowball effect". In this option, you pay the minimum on all credit cards except one. That one, the one with the highest interest rate, is going to get as much money as you can throw at it. Even an extra $10 a month will make a big difference and reduce the debt faster. When that card is paid off, choose the next highest interest rate, and do the same thing. While doing this, don't take on any new debt unless you absolutely have to.

If you need more money for your debt consolidation efforts, don't be tempted by credit cards that offer you zero-balance transfers for six months. Read the fine print. When the six months are up, the new interest rate kicks in and it may be higher than what you were paying to begin with. Some people think that they can just get another zero-balance credit card and roll their balance over to that when the six months are up. That works for a while. Nevertheless, eventually, applying for new credit cards harms your credit rating more than it helps.

If you still can't kill the debt, you might consider borrowing against the equity in your home or car. Your mortgage rate is often less than the interest rate charged on credit cards, and this is one way to handle debt consolidation.

Another option is to contact the National Foundation for Credit Counseling. They will give you a free confidential consultation and free credit counseling. Like other debt consolidators, they get paid by your creditors, and it is in their best interest to help you pay off your debt. You can contact them by phone and they have offices in many cities.

A final option is one of the many debt consolidation companies available. If you choose this option, make sure that they don't require you to pay anything until they have made good on their promises. Many companies are reputable and can help you. But if they promise to take all the negatives off your credit report, or demand money upfront, run. Nobody can remove accurate negative information, such as bankruptcy or charge-offs, from your credit report. Do your homework first, and study what each company offers and how much they charge before you sign up.

Debt consolidation companies can provide support, and they will do a lot of the work for you such as contacting creditors. They may even pay your individual bills for you, requiring you to send just one large check to them each month. But make sure you choose a reputable company with a good track record. Like many other financial industries, there are scam artists out there who will take your money and leave you in more debt than you were before.

There are many ways to handle debt consolidation. Some require you to do a lot of the work yourself and this may seem overwhelming. If you need someone to help, and you are willing to pay for the service, a debt consolidation company may be a good solution. Just make sure you find a reputable company, one with a proven track record of fulfilling their promises, and you'll be fine. The debt will be gone before you dreamed possible.