Debt Consolidation - When to Seek Help

When you are in of need credit counseling or even debt consolidation, you don’t need it tomorrow - you needed it yesterday. If you are spending 40% or more of your income on debt payments, you need financial assistance. Choosing the best company to handle your financial needs can be the difference between terminal credit and a debt lifeline.

The idea of debt consolidation is simple. For example, if you owe $30,000 on your three favorite credit cards, you are likely paying 15% to 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. But if you are not sure that you can stop purchasing unnecessary items, you may want to consider credit counseling as well.

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 finances are more manageable than you previously thought. The next step is to set a realistic budget. By setting a budget, many people are able to answer the question, “Where is all that money going?”

If you 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 of your debt, but this may be unwise. It should be your decision based on your own specific financial situation.

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 are essentially 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 credit 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.