The ABCs of Debt Consolidation

What Is Debt Consolidation?
Debt consolidation basically involves taking out one loan for the purpose of paying off other loans, such as credit cards, that have higher interest rates. The interest rate of the new loan is lower than the combined total of the interest rates of the loans that you are consolidating.

When Is Debt Consolidation The Right Choice For Me?
Debt can hang over your head like a dark cloud, especially if it is coming at you from several different directions. A good indicator that you are in need of debt consolidation is if you find yourself spending 40 percent or more of your income to pay your debt. Review your own budget to see just how much of your income you devote to the repayment of debt every month.

Why Should I Consolidate My Debts?
Debt consolidation will help you pay off your debts sooner. It will also make the payment of your debts more manageable and less confusing because you will have to plan for only one bill every month, rather than several. More importantly, it will keep more money in your pocket every month, instead of in the hands of creditors.

Which Debts Should I Consolidate?
It is wise to consolidate your larger debts and those that have higher interest rates. Making just your minimum payment for debts that have higher interest rates just barely covers your borrowing costs and does little to pay back the principal sum of money you borrowed in the first place.

Are There Any Debts That I Should Not Consolidate?
Yes. Debt consolidation is only recommended for those debts that are too large, unmanageable or have extremely high interest rates. Those bills that you feel comfortable paying, or are near being paid off, should not be included.

What Should I Do Now?
Sit down and review your budget. If it seems as though too much of your paycheck is disappearing into the hands of your creditors, seek the advice of a credit counselor. Your shoulders will feel a little lighter, your wallet a little heavier and you a little happier.

Learn more about debt management, credit relief, and other debt solutions.

• Debt Consolidation
• Tax Debt
• Credit Counseling
• Bankruptcy

Debt Topics

• Avoid Foreclosure
• ABC's of Debt Consolidation

Credit Topics

• Consumer Protection Laws
• Your Poor Credit Report

Bankruptcy Topics

• Refinancing After Bankrupcty
• Is Bankruptcy the Only Option?

Tax Relief Topics

• Lower Your Tax Debt Now
• Property Tax Relief Guide