Debt Consolidation

You're drowning in debt, credit card bills are piling up and you are stressed to the max. Surprisingly enough, you are not alone. Over 70% of the American population is seriously in debt. There are debt consolidation companies out there who claim they can help consolidate your payments and work with your credit card companies to get your interest rates down; but beware of such claims. I cannot count how many companies like these have gone under or have been in a negative spotlight because they have not followed through with their claims. Many people have lost money and ended up having to file bankruptcy because a debt consolidation company burned them. Don't get me wrong there are some good companies out there that will help you with your credit and debt problems, but you need to research different companies in order to find a reputable company. The first thing you should do is be sure to verify with the Better Business Bureau that the company doesn't have any complaints on record, if they do this should raise a "red flag" immediately. Another option is to check with family, friends and colleagues to see if they have used any of these companies or if they know of a good one. These two suggestions will get you started on the right track.

When you do find a company to work with there are a few things you should aware of. One, if you are having them pay your payments for you it will show up on your credit report. This usually lowers your credit score because creditors and financial institutions see it as one step before bankruptcy. The rumor is that now a days credit card companies are not as willing to work with the debt consolidation companies because of the negative reputation. Make sure you know what you are getting into and understand your contract completely.

Suppose you decide a debt consolidation company or a credit-counseling agency is not a good choice for you. If this is the case, another thing you can do is to explore the option of a home equity loan or line of credit. Banks usually offer better rates on home equity loans plus they have an advantage; they are tax deductible. If you have equity in your house and your credit history is fair, a home equity loan could be a great alternative for you to be able to manage your debt and pay it off quicker. There are so many programs available that there's a good chance you will be able to find one that will work for you. You need to choose a reputable bank or mortgage company and make sure you select a trustworthy loan officer. Credit unions are also a good option because they want to loan money for the interest and most of the time the loan officers aren't expecting a big commission check.

Maybe a debt consolidation company and a home equity loan are both out of the question? What other choices do you have? There are a few things you can try. First call up your credit card companies and try to negotiate a lower interest rate. Second, check to see if you can transfer balances to a lower rate. Then sit down and draw up a plan to pay off one card at a time. Start with the highest interest rate and go down. For instance if you have a credit card that is 17% and another one that is 12%, make a goal to pay off the one that is 17% percent first. The way you start is to review your budget and see if there is any extra money you can put toward the high interest card. Shave your spending as much as possible and put all of the extra money toward paying off the card. Lets say you have an extra $150 you can pay toward your credit card every month. If this is the case you would pay your minimum payment on the credit card and then add the extra $150 on top of the minimum amount making the payment $200. This will help dwindle the balance more quickly and you will be surprised at how fast you can get it paid off. While doing this you need to continue paying the minimum on all of your other credit cards and loans but only put the extra money toward one card at a time. When you have paid off the first card then take the money you were paying on that card and pay it on the next card. For example lets say you paid off your first card and you were paying $250 a month on that card (this is your minimum $50 and the extra $200). Subsequently, you would take that $250 and add it to the payment on the next card you want to payoff. Supposing the minimum payment on that card is $75 you would add $250 to your $75 and the new payment you would make on the card would be $325 a month. As you can see when your payments become larger your balances will become smaller at a faster rate. Do this with each card and you will notice a big difference in your remaining balances. In order to make this process work you have to be disciplined and faithfully put the extra money toward the chosen card every month. This will take some time but eventually you will have your debt under control and you will be able to breathe a sigh of relief.

A mound of debt doesn't have to mean bankruptcy is the only choice. If your debt is out of control and you think you have run out of options then review the suggestions listed above and see if there is one that can work for you. Don't quit, with a little effort and research, you will be able to get your finances under control.