Debt Consolidation Companies Part I: When to Seek Help

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When you are in of need debt and credit counseling, you don’t need it tomorrow - you needed it yesterday. Choosing the best company to handle your financial needs can be the difference between terminal credit and a debt lifeline.

If you are spending 40% or more of your income on debt payments, you need financial assistance.

The idea of debt consolidation is simple. If you owe $30,000 on your three favorite credit cards, for example, you are paying at least a national average of between 15 and 18% interest. Your monthly payments are around $600. With debt consolidation, you “consolidate” your debt into one loan at 6% interest. You could save $100 a month in payments.

If you cannot pay off all of your high-interest credit cards, and if you are certain that you will not run up more nonessential debt in the future, then you should consider credit card debt consolidation.

Taking the initiative to find out if you could benefit from debt consolidation is the first step. You may potentially subtract years from your debt payment, or you may even realize that your financial is more manageable than you thought previously.

Debt consolidation begins with setting a realistic budget. By setting a budget, many people have realized unforeseen answers to the question “Where is all that money going?”

At the very least, debt consolidation will grant you more control over your finances. Study after study shows that most of us do not adequately understand our debt-to-income situation. As bill pressures mount, our willingness to face it shrinks. In many ways, we have a “financial conscience” that appears only when we already are in trouble. There are more concrete signs to be aware of before you are in over your head:

• Increased principal while paying only minimums on credit cards.
• Repeatedly increasing credit limits on cards.
• “Floating” checks between debts and checking account deposits, hoping the money is deposited first.

If you may think you may need debt or credit counseling, make a list of all your outstanding debts and pay special attention to those debts that have interest rates. Many experts suggest consolidating all if your debt, but I disagree. It should be your decision. If you are well-organized and pay (at least) part of every debt in a timely way, and are almost never late with your payments, then you may be better off consolidating only high-interest debt. By treating all debt exactly the same, you essentially are repeating the original problem - you give up control of your debts by ignoring them.

Your goal is to have more money than month left when you bill is due. With debt consolidation, you may be able to pay off other bills with low-interest rates, with your savings.

Ignoring debts is a clear sign of a need for debt counseling. Maybe you do not actively lower your debts because a spouse is “responsible” for the bills. Maybe you have a large amount of money coming in, so debt does not seem pressing. Whatever the reason, ignoring debt is not a good saving strategy and can easily lead to an overwhelming situation.

Your personal money-management style is very important in determining the kind of financial help that is best for you. If you feel out control, or if you cannot quickly determine how much money you are saving at the end of each month, you should seek assistance. It is never too soon to inquire about credit counseling. Once you have decided that you need help, don’t delay: start looking for the best counselor today.

Debt Consolidation Companies Part II: What to Look For