Most of us have heard varying accounts of debt consolidation, while some promote consolidation as a simple and effective means of debt relief, others give terrifying accounts of increased debt and ultimate financial disaster. The truth is somewhere between these extremes, depending on the situation, and debt consolidation could potentially be effective at lowering your debt. A debt consolidation program may or may not be a good solution for you, depending on the amount and type of debt, and your current earnings. How well you do with a debt consolidation program may depend on your ideas about debt and money, so be sure to keep these principles in mind. If you're thinking about a debt consolidation loan, make sure you consult with a professional knowledgeable about a wide variety of options, rather than someone who just wants to sell their product.
It may not be necessary to purchase a product. It may be that you need to re-think your attitude toward debt in general. Or, possibly, a combination of professional advice and a change in spending habits may work best for you. An important decision to make regarding your debt consolidation is how long you want the repayment period to run: lower monthly payments will mean a longer repayment period and increased interest.
If you only lower your payments without bothering to change your spending habits, your debt will continue to grow. Would you be better off with a debt consolidation loan or a debt consolidation mortgage? It is possible that a mortgage might offer a lower Annual Percentage Rate, but the longer you take to make payments, the greater the risk to your house. If payments on your debt are becoming too much, it's time to do something different, a debt adviser will be able to help you in making certain decisions. Do you need a professional debt solution? Everyone's situation is different and not every situation is applicable to every person.
As such, a debt advisor can be quite helpful in choosing the right one. When you have taken out a debt consolidation loan do not keep charging to credit cards, store cards or overdraft accounts. When you are using the consolidation loan to pay off the older debts, and being charged on those accounts, consolidation tempts to make the situation more serious. You may wish to keep one credit card for emergencies, but not without first analyzing your spending habits because if you continue to pile new debts on top of the old, you will just keep widening the hole you were trying to get out of.
Your debt now is a direct result of what things that you used to to? Be sure to analyze your spending habits and consider ways to change your ways, as consolidating debt to free the way to spend more money will put you in an endless cycle of ever-mounting debt.
Maria is a freelance journalist writing about loans at eComparison.
