Debt Consolidation Programs – Know Your Facts Before Consolidating Debt

If you are considering a debt consolidation program

, it pays to research your options as soon as possible, because some companies that offer debt consolidation are better than others. If you are lucky, you will do your research before you get into a very tight spot with your finances, because the better companies may be more difficult to find, especially if your credit is already in trouble. The companies that offer the least beneficial terms, on the other hand, can be very easy to find, even if you are already in financial hot water. Unfortunately, these companies may charge a premium for the convenience.

Debt Consolidation Companies

Debt consolidation companies are specifically in the business of taking over your outstanding debt from different sources, paying off the multiple balances, and then setting you up with a single creditor, themselves. You are left with just one monthly payment, but unfortunately they may actually be increasing the amount you pay over the life of your new loan because the interest is higher, sometimes as high as 25%.

They compensate for this new higher interest rate by spreading your payments out over a longer time period, as much as 10 or 15 years. So, while your monthly payment may be reduced, you are paying so much more over the life of the loan that you are paying a very expensive premium for the convenience of having someone else do your refinancing homework for you. Especially for someone with a good credit rating, this can be the worst type of debt consolidation in terms of overall cost.

Do It Yourself Debt Consolidation

If you have reasonable credit, or some kind of collateral for your loan, it is far more economical for you to go to the bank or credit union you are already using, and ask them directly about any debt consolidation programs they have available for their customers.

One reason for going through a bank or credit union is that they want to help their customers, who are also depositors of funds into their system. They are hopeful that, by making you a happy customer through their loan programs, you will be predisposed to deposit more of your money with them in your checking, savings, and certificate of deposit accounts. It's just good business on their part. They will look at your debt situation with an eye to your total financial picture, and come up with a solution that benefits everyone.

So don't hesitate to talk to your local bank official or loan officer to negotiate favorable debt consolidation terms, while your credit rating is still in the favorable range and banks are most interested in offering you a good deal. That's good financial planning on your part.

Debt Consolidation Programs Know Your Facts Before Consolidating Debt

By: jerryarcher

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