Debt Consolidation – is it Right for You?

If you’re buried under a pile of debt, consolidation may be a solution for you. Debt consolidation is one debt relief option that has helped many people overcome their money woes.

Debt consolidation means taking out another loan to help pay back your debts. It takes all of your debts and puts them into the hands of one creditor. You have only one monthly payment for everything and one place to send it. It’s a great advantage for some people, but for others it’s not the best option out there.

Debt Consolidation May Be Right For You If…

You Have Trouble Making Your Monthly Bills. Debt consolidation is the perfect option for people who have a kitchen table covered in bills, all to different creditors. If you’re seeking credit card debt relief that will make your monthly finances more manageable, this might be the right option. Consolidating usually gives you better interest rates as well.

You Have Good Credit. Not everybody qualifies for debt consolidation. Considering the circumstances, your credit doesn’t have to be spotless, but you might want to take a look at your credit report before you apply.

You Don’t Mind Paying More In The Long Run. By making your monthly payments lower and getting a better interest rate, you’ll most likely have to spend many more years paying the debt back. That’s why this option is ideal for people who have trouble making ends meet today, and don’t mind paying further into tomorrow.

Debt Consolidation Is NOT For You If…

You Want Your Debt Paid Off Sooner Than Later. Ditto as above: Debt consolidation will mean taking more time to pay them off. If you want to make a debt relief plan for the next few years that will get you debt-free, you’re better off talking to a non-profit credit counseling organization. They help people make five year plans to get out of debt.

You’re An Impulsive Shopper Who Habitually Lives Beyond Your Means. If you’re a credit card-aholic, this might not be a good option for you. Although it’s meant to help people out, for those who love to spend over their limit, it is very dangerous. By making the monthly payments small and manageable, this often leads to the temptation to take out more loans. If you get a pile of credit card debts in addition to your consolidated loan, you’ll really be in trouble.

Notice I said that it MAY be right for you. There are no clear answers as to whether it’s a good or bad thing. It all depends on you and your situation. Talking to a qualified debt counselor can help you to straighten it all out.

Alan Winkler is a personal finance writer for Debt Consolidation Advice, a credit card debt relief blog, and a debt analyst where he offers tips on how to get out of debt. He also writes about the debt relief industry and examines the various solutions available like debt consolidation and credit counseling.

2 Responses to “Debt Consolidation – is it Right for You?”

  1. Sarah April 20, 2011 at 5:29 pm #

    I think it’s clear that if you can’t change the lifestyle that got you into your current situation there is NO good solution, only little band-aids. It takes focus and dedication to cut down on debt and steer clear of it moving forward.

  2. Jerret April 20, 2011 at 5:52 pm #

    Yep, you’re exactly right, Sarah. Most of our money troubles are a reflection of what’s going on inside each of us. Until the inside is fixed, nothing will change. Thanks for commenting.