Debt Consolidation: What It Is, How It Works, Is It For You?

Up to your eyebrows in debt? You're not alone! Getting credit in this day and age is very easy, and it's also very easy to get caught up in having all the luxuries and niceties of life by putting it on credit, instead of paying for it in cold, hard cash. All of the niceties of life can now be easily charged. And before you know it, your outgo exceeds your income. What will you do? Depending on your debt and income, you may want to consider Debt Consolidation. Read on for more information.

If you catch your spending habits in time before they become totally unmanageable, you can often take care of your debt problems yourself. This will take a little work on your part, and if you are disciplined enough to follow through, you may be able to work your way out of debt on your own. But many people find it isn't easy to do this on their own. And for many, a debt consolidation program in the form of counseling or a loan, is the only way they'll change their spending habits. Companies like American Consumer Credit Counseling and Credit Solutions can help you get started looking into your debt problems, and offer possible solutions.

What is Debt Consolidation? Simply put, it's combining all your loans into one. It can be done by taking out a consolidation loan, or it can be done through one of the many credit counseling services that are available in most areas. The credit counseling services will negotiate with your creditors to obtain the lowest monthly obligation needed to satisfy all your current eligible debts. This will usually include lower interest rates for you. The one payment you make to the credit counseling service should thus be substantially lower than the when you were making payments to each creditor on your own.

If you decide to use a credit counseling service, you'll want to look for a reputable one. Check with the Association of Independent Consumer Credit Counseling Agencies or the National Foundation of Credit Counseling to see if the service you're considering is a member of either group. Also ask the service for references and then confirm them. Once you have found one, be prepared to show them all of your expenses as well as your income. They will also ask you to give up your credit cards while you are in their program.

Debt Consolidation Loans are also available if you decide you don't want to go the counseling route. If you are a homeowner, you can also look into a home equity line of credit. Be sure to do your homework carefully if you are considering this option, as your biggest asset is on the line. If you cannot make the payments, you risk losing your home.

Whether you use a loan or the counseling service, the only debts that are generally eligible for consolidation are unsecured debts. Credit card debt, medical expenses, and personal loans are all examples of unsecured debts. Mortgage and car loans are examples of secured debts, in that if you fail to pay them, your creditor can foreclose on your house or car.

In short, there are several options available to you if you find yourself having difficulties in meeting these monthly obligations. Carefully evaluate which one is best for your situation. It might not be easy, but it will be worth it in the long run.

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