Thursday, April 19, 2007

Debt Consolidation Help - Is Debt Consolidation Right for You? Part I

Seeking debt consolidation help is one of the options available
to you when you have too much debt and owe too many creditors.
So how do you know if debt consolidation is the right option
for you and your debt situation?

When a debt consolidation program is put together in the right
way, it can help you pay less money and get out of debt faster
than you would have done if you hadn't consolidated your debt.

Keep in mind that debt consolidation is not the be all end all
of getting out of debt but it can play a big role in eventually
becoming debt free. This is especially true if you take your
debt consolidation program and combine it with other financial
management and debt management tips and techniques to get out
of debt and stay out of debt.

So what exactly is debt consolidation? Debt consolidation involves
taking on new debt to pay off your existing debt immediately. Let's
say you owe fourteen different creditors and you are making monthly
payments to all fourteen individually. When you consolidate your
debt, you take on new debt that you use to pay off all your other
debts. You then make one monthly payment on your new debt. A
big part of good debt consolidation is that you get yourself a
much lower interest rate on your new debt than you had on all your
other debts.

For example, let's say you have a lot of credit card debt on four
different credit cards. And the interest rates on these cards are
14%, 17%, 19% and 21.9%. You get a new loan with an interest rate
of 7% and use the money to completely pay off your credit card debt.
Now you have one debt at a much lower 7% interest. You can also
improve your credit rating in this manner.

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