Is Debt Consolidation a Good Idea?

by Miriam Caldwell | More from this Blogger

02 Nov 2006 10:00 PM

Debt consolidation companies are a big business. Many are non-profit organizations that will help you pay off your debt. They will negotiate with your creditors to bring down the amount that you owe them. They will take a monthly payment from you and distribute it to all of your creditors. This will mean that you may save money over time, you will pay just one company, and eventually your debt will be paid off. This sounds like the perfect solution to many people.

However, debt consolidation does have definite drawbacks. It does not look particularly good on your credit report to show that you have used this service. However, it is better than not paying your debts back at all. Another drawback is that many of these services do not provide counseling on staying out of debt and changing your current spending patterns. Many people who use a debt consolidation program end up in as much debt again.

Another drawback is that there are debt consolidation services, which are not entirely honest. They may not pay your money to your creditors. It is extremely important that you take the time to research the company you use, if you do decide to use a debt consolidation company. You should check the Better Business Bureau in your area for any complaints. You should also use a well-established company that has been in business for several years.

You can do the same thing a debt consolidation company would do yourself. You simply need to call your creditors and negotiate the amount you owe. If you are not behind on payments, they may not be willing to negotiate how much you owe, but you should also try to reduce the interest rate you owe. You will then need to set up a debt repayment plan, and follow it. As you do this you will need to create a budget for your family and stick to it. As you make these changes you will change the way you look at money, and hopefully you will make the decision to stay out of debt.

Related Articles: How to Set Up a Debt Reduction Plan

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Learn more about Miriam Caldwell

Miriam is a SAHM mom of three children. She has a daughter who is seven, and two sons, four and two. She loves being a parent and spending time with her children.

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