Should You Consider Debt Consolidation

Many consumers are finding themselves in debt as never before. As jobs are lost and the economy tumbles further into trouble every day, many people are forced into considering some sort of debt consolidation program. If this sounds like you, be careful of the choices you make and understand the ones available.

New companies are sprouting up that say they can help you consolidate your loans. This might sound easy but in reality you could be buying even bigger problems before you’re done.

First, you can reduce your debt just by getting your interest rates reduced. This doesn’t affect your principle and you are still obligated to pay your creditor whatever it is you owe him. The second way is to have your principle reduced. Reducing your interest rate should be the first thing you try. This won’t hurt your credit rating. Reducing your principle with severely impact your credit history.

Having your principle reduced is another matter. This does affect your credit history. Your creditors, even though they may have agreed to lower your principle amount, are now reporting this to the credit bureaus as partial payments and discharged debts. This is almost as bad as having a bankruptcy on your credit report!

These same companies typically charge some hefty fees for these services, and they want their money up front. Others ask for monthly payments because they say they continue to work on your behalf. Usually they do nothing once they get your money.

If you are asked to sign a contract, really pay attention to it. Find out what they plan on doing in exchange for what kind of money they are asking for. If they want a one time payment up front, ask why. In these situations it’s all too easy to take your money and never do a thing for you.

In reality, they don’t pay anything for you. By the time the collection agencies are beating down your door, this debt consolidation company has disappeared with your money. Before deciding on paying someone to work on your behalf, try negotiating with each of your lenders on your own. Companies can’t do much better than you can! There is no reason a creditor is going to choose to work a deal with a third party company on your behalf.

Looking to find out what your debt consolidation options are? Get the exclusive inside scoop now with our complete debt consolidation overview.

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