Bad Debt Consolidation Can Help You Get Your Finances Put In Order

According to a February 2010 Nilson Report, there were 576.4 million credit cards in circulation at the end of 2009

. The total United States revolving debt, which is 98% credit card debt, was $864.4 billion as of January 2010, according to the Federal Reserve. The average household has $16,007 worth of credit card debt. Fitch Ratings reports that the U. S. Credit card default rate is currently 11.37%. It appears that more than a few people need some help with bad debt consolidation.

Debt Consolidation

The process of consolidating debt consists of transferring high-interest credit debt in multiple accounts into a single account with lower interest. Getting all of your high-interest cards paid off is the initial step towards being able to pay off your debt entirely.

Consolidation Loans

A consolidation loan is an unsecured loan made by a bank or low-interest credit company that has a fixed monthly payment and interest rate. Unsecured means that you do not have to put up any type of collateral in order to qualify for the loan. With this type of loan, you will be able to count on having the same payment month after month making it much easier to budget your money.

Borrower Beware

Beware of companies who promise to take care of all of your debt problems and negotiate lower rates with the card companies. The problem is that they build in a fee to your monthly payment. In other words you are paying them a percentage of your debt to handle your financial mess. This may or may not be worth the money. You could take the money that you would be paying them and add it to the payments yourself.

You have probably received many low-interest balance transfer offers in your mailbox. These may look great at first, but read the fine print. How long will the low interest rate last? What will the interest rate be after that? Most likely you will be back where you started - with a high-interest credit card.

When you are investigating bad debt consolidation options, remember to check your emotions at the door. It is very easy to get taken advantage of when you are in a desperate financial situation and emotions are running high.

by: Lonnie Nuckols.

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