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Although “good” is a subjective term, we can clarify positives and negatives related to using debt consolidation as a method for debt management. Debt consolidation functions in a manner similar to refinancing a home mortgage; you’re trading one or more debts for a single new debt, typically one offering lower finance charges. Potential benefits associated with debt consolidation include:

• Streamlining debt management: Dealing with a stack of credit card bills and loan payments each month increases your chances of missing a payment. Credit card debt consolidation can help by rolling several balances into one.
• Cleaning house, and your head: If you’re stressing due to debt, using debt consolidation can help you regain some feeling of control. Paying off multiple debts with a debt consolidation loan or consumer credit counseling can eliminate problems with debt collectors calling you at home and work, along with helping you focus on paying off your debt consolidation balance in place of several credit card debts with changing balances and finance charges.
• Lower finance charges: When shopping debt consolidation loans, it’s important to compare the annual percentage rate (APR) for the debts you’re consolidating along with the APR for debt consolidation options you’re considering. Your goal is to consolidate debt to one account with a lower APR than the debts you’re consolidating. APR provides a more accurate estimate of actual debt costs because it includes interest rates, penalty fees and lender fees.

Debt management: Debt consolidation can help, or not

• Using your home for collateral: Unsecured debt consolidation loans can be difficult to find if you have bad credit. In today’s economic climate, with housing values declining, it may also be difficult to qualify for a home equity loan or line of credit with less than admirable credit. If your home has lost value, you may not have enough home equity to qualify for debt consolidation through home equity financing or refinancing your mortgage.
• Credit card balance transfers: Although these can be useful to consolidate a few low credit card balances, it’s easy to lose potential benefits if you fail to pay off your balance transfers prior to the expiration of the introductory period.
• More debt than before: This is a frightening scenario that can happen. Clearing up debts with a debt consolidation can provide a false sense of security which can lead to more debt. Credit card debt consolidation can lead to a vicious cycle of paying off, consolidating and incurring more debt.

Those struggling with debt can benefit from programs offered through non-profit debt consolidation programs. These programs can help you determine why you’re in debt, and establish debt management options through budgeting and affordable repayment plans.

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The New York Times reports that Congress is gearing up to debate whether or not to increase the federal government’s debt ceiling. Hello? Isn’t it about time for our elected officials and so called leadership to start setting an example for we, the consumers? We are constantly reminded of the importance of financial prudence; meanwhile our government is spending like a fleet of drunken sailors. At some point, the government and debt-ridden consumers have to know when to say “when.” The government’s balance sheet is too big to tackle here, so let’s concentrate on reducing personal credit card debt.

Drowning in debt: Has this become America’s new favorite past time?

Recent reports of increased credit card usage among consumers seem to suggest a revival of consumer confidence, if not carelessness. Carrying credit card debt doesn’t make sense, particularly in uncertain economic times.  Here are some reasons to think twice before running up credit card debt:

• Variable interest rates: Many credit cards carry variable interest rates, which can go up if the financial index the card is tied to increases.
• Minimum payments and unpaid interest: Minimum credit card payments typically do not cover all of the accrued interest, and unpaid amounts are added to your unpaid credit card debt.
• Finance charges: Although legislation has limited how and when credit card companies can impose penalty fees, these fees can add to your debt if you forget to make a payment or exceed your credit limit. If you incur a penalty fee for the first time, it’s worthwhile to call your credit card company and request a waiver of the fee.
• Job insecurity: Financial analysts and economists report that the economy is rebounding, but unemployment remains high. Carrying credit card debt takes a bite out of your budget that can be disastrous if you lose your job or your income is reduced.
• Temptation: Somehow paying with credit cards can lead to more spending. Avoid the temptation to spend lavishly or unnecessarily by carrying cash or a debit card instead of credit cards.
• Emergency savings: Relying on credit cards for emergencies can create costly debt. It’s important to establish and fund an emergency savings account. The amounts you’re paying toward credit card debt could have gone to savings instead of debt.
• Credit scores: Like it or not, credit scores can impact more than your ability to qualify for loans and credit. Employers and insurance carriers may check your credit scores as part of their approval processes. Although the bad economy has thrown a monkey wrench into the allegedly reliable models used by credit scoring companies to predict consumers’ creditworthiness and overall reliability, the system remains unchanged, and poor credit scores can create more than financial problems.

Seeking debt help is essential if you’re struggling with credit card debt. Contacting consumer credit counseling and debt consolidation programs is the first step toward finding affordable debt management solutions. Insurmountable debt causes physical and emotional stress, can strain interpersonal relationships and cause problems at work. Don’t wait. Please get the debt help you need today.

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