What’s So Great About Consolidating My Debt?

You have gone over your monthly bills and are wondering where you will get the money to pay your creditors.  There just is not enough to go around, especially in these dire economic times.  It may be time for you to consider taking out a debt consolidation loan to help you meet your monthly financial obligations. 

There are many programs available for you when you need to consolidate your bills into one monthly easy-to-manage payment.  Some of these programs may even be able to reduce the amount of debt you have by getting you a lower interest rate.  You are tempted to go with the first progam offered to you.  But wait!  It is of the utmost important that you become informed about the pitfalls of some of these programs.

Most debt consolidation programs are not easily obtained because most people needing these programs do not have stellar credit ratings.  As such, the program you are considering may end up charging you higher interest rates than what your current creditors are charging.  This obviously defeats the purpose of consolidating your debt! 

The debt consolidation program sometimes seems better than it actually is.  You may think you are dealing with someone who is truly interested in your financial well being.  However, this is really just a business wanting to make a profit from you.  Remember you may only have to make one monthly payment on your debt but part of this payment will be a built-in fee for the debt consolidator.  You can sometimes work directly with your creditors and come up with a payment plan that includes no fees for you. 

You may be tempted to obtain a low-interest balance-transfer card to consolidate you debt.  However, most likely the new card will have a clause that will increase the interest rate in a few months.  If you decide to go this route, make sure that you close all of your accounts personally and work directly with the credit card company that you want it marked as “closed at customer’s request”. 

There are some better ways to explore obtaining a debt consolidation loan.  If you are a homeowner, you may be able to get a home equity loan or explore the possibility of refinancing your property.  If you own your car, you may be able to obtain a secured loan by borrowing against it.  If your credit is somewhat intact you may be able to get a personal loan at a lower interest rate than your current credit cards.  Or, you may be able to work directly with your creditors to lower the interest rate you are current paying on the debt that you owe.  Before consolidating your debt, be sure to explore all of the many options available.