If your monthly credit card bills are more than you can afford, it is time to seek some help. Perhaps you have received some advice to consolidate debt and want to know if this is a good option for you. Like so many things in life, debt consolidation has positive and negative aspects that you will want to consider before applying for debt consolidation.
First we’ll look at the good. Debt consolidation can help many people. If you have higher credit card bills than you can handle or if the interest on your credit cards is too high, you might be a good candidate for debt consolidation.
Most debt consolidation services have a relationship with the credit card and collection companies. They will work with you on a debt repayment plan which will be a better fit for your budget. You will have a lower monthly payment and a lower interest rate.
The main problem with debt consolidation is that it doesn’t fix the root of your problem. Unless you can increase your income while decreasing your spending, you will end up in the same situation as before. In fact, it is possible that debt consolidation will add to your problems.
While some companies will require you to close your credit card accounts, with others your credit card balance will go back to zero. If you run up your credit card debt again while you are still paying your debt consolidation loan, you will end up with twice as much debt and in a worse situation than when you started.
Do not consider debt consolidation until you have addressed your budget needs. With a budget plan that you stick too, you will be able to enjoy the benefits of debt consolidation without worrying about increasing your debt.
If your debt problem is not too bad, consider fixing it by yourself. Debt consolidation companies can help you, but they are also a business. Discover what fees you would be charged with the debt consolidation plan before deciding.
How to Choose
When you are ready to sign up with a debt consolidation company, do your research first. A simple search online will turn up several companies and is a good place to start. If possible, look for recommendations and also check to make sure the company does not have too many complaints. Online forums are a great place to read user reviews if you do not want to ask anyone in real life. Check with the Better Business Bureau as well.
Before you sign anything, read the contract carefully. Different companies will offer you different levels of flexibility. Some companies will require you to close current credit card accounts. Some will make the payments for you while others will give you more control. Decide what is best for you and take the time to consider all your options carefully.