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Debt Consolidation as a Solution for Your Credit Card Debt

2nd March, 2010 - Posted by Sean Horan - No Comments

Most Americans have some level of debt, and a fairly high percentage of them are spending time each day fighting creditors and becoming increasingly frustrated with their mounting bills.  Counseling, debt settlement and even bankruptcy are options, but a debt consolidation program may be the best possible management strategy to help you pay off your bills fast.

When to Choose Consolidation

There are several situations in which you may want to choose debt consolidation as a method to handle your bills over the other kind of programs available.  If you’re working with several different balances and creditors, it might be simpler to deal with one total balance. That will mean one statement each month and just one payment, and that kind of simplicity can lead you to a financial management strategy you can realistically attack.

Another situation where this type of solution works well is when your current monthly payments are too high. If you go with a debt consolidation, you stretch the total balance out over a longer period of time, and that means less of your income will be devoted to your bills, which should allow you to have more cash on hand. High interest debts may be another time when consolidation will work out better for your monthly budget. Because consolidating your debt may mean a lower interest rate you’ll owe less overall, saving you a bit more money in the long run.

*Debt Consolidation Pros
Debt consolidation entails taking out one loan to pay off many others. This is often done to secure a lower interest rate, secure a fixed interest rate or for the convenience of servicing only one loan.  The negotiations with the lender are carried out by a third party, trying got get you the lowest rates with your lenders.  One monthly payment is made to the consolidation company and they take care of making payments on all your accounts.
The consolidation company will also take care of all paperwork, see that any fees are paid, and will close down unused accounts.  Your debt can usually be taken care of within five years.

A Few Words of Caution

While consolidating is a great idea for many different reasons, using this type of program isn’t right for everyone. These programs shift the location of your debt, not eliminate it entirely. You do still owe money, and at some point, you are going to have to repay that.

One of the real drawbacks with a program like this is that you may feel like you owe less money. For example, if you’re using programs that consolidate debt to merge many credit cards, you’ll instantly be aware of the fact that your balances are lower, but the key here is not to use those cards again, or you’ll have more problems than you did initially.

It’s also important to note that while the interest rates you get might be lower, you might have to pay more total fees in interest rates, especially if you plan to repay over a much longer period of time. While this can be worth it to get the creditors to stop calling instantly, it can also be a drawback if you’re looking at the long term benefits of such a program.

The other potential drawback is the risk involved. These kinds of programs work differently, and if you place your home up for collateral, it is possible to lose it should you fall behind on the monthly payments you make. While it is an instantaneous method of debt relief, it can put your overall assets at risk.

Managing the bills you have now is your overall goal, and while you do have to be careful, programs like this certainly beat bankruptcy in many different situations.

Impact Debt Settlement is committed to providing sound advice, tips for paying off credit card debt and workable long-term solutions to get out and stay out of debt. Through our program, clients can successfully settle debt for an average of 50%-70% of current