Debt consolidation for out-of-control debt
Debt consolidation is commonly used by peopel who are facing out-of-control debts, and are worried that they won't be able to pay them all. This isn't the only situation where debt consolidation is helpful - and elsewhere on this site you'll be able to find more information on debt consolidation in other situations. But one of the biggest benefits of debt consolidation is the help it offers to those who are being drowned by unmanageable debt.
Sorting your problem before it reaches crisis point
Far too many people don't deal with their mounting debts until they find themselves unable to pay that last bill, and then end up quickly embroiled in an abrasive, unwelcoming world of court judgements, threatening letters, and bailiffs. If you think this is something that could happen to you in the future, it's important to be proactive, and to nip the mounting debt before it takes over your life. And you'll find that debt consolidation is a crucial tool in taking that first step.
So, don't think of debt consolidation just as a last resort when things are otherwise unrecoverable. You'll get a far better deal if you take action earlier, and arrange your debt consolidation before you find yourself with your back against the wall.
Where can I find debt consolidation advice?
You don't need to pay for advice on debt consolidation. The internet is a wonderful resource, and full of valuable information to help you make an informed choice. The fact that you're reading this page now suggests that you realise this, and I hope that, either on this site or elsewhere, you'll be able to find some good information on debt consolidation.
But don't think that the online world is the only source of advice. The chances are that in your very own neighbourhood you'll find some source of debt consolidation. There are a great many local and national non-profit organizations dedicated to helping people in difficult financial situations choose between the options available to them, and many of them will give you free advice on debt consolidation. They're a valuable resource because they are often staffed by people who have themselves recovered from crippling debt, and know how valuable it can be to consolidate your debts into something more manageable.
What can I expect?
How much you can hope to get from debt consolidation really depends on your personal situation. If you have a lot of small unsecured loans at high interest rates - store card or credit card loans would be a typical example - then you can often significantly reduce your payments through debt consolidations. In other cases, such as when most of your debt is in a secured lump sum like a mortgage, debt consolidation might not be able to provide much help - but it is always worth at least investigating the options, and there's always the chance of being pleasantly surprised by what can be done.
Going it alone, or bringing in the experts
There's nothing magical about debt consolidation - it's something anybody can arrange for themselves, if they are so minded. That's in theory at least; in practice things can get complicated, and sometimes it is easier to work through a specialised debt consolidation company. However, options are always good, and with debt consolidation you do have these two choices: arranging a debt consolidation loan by yourself, or using a debt consolidation company or organisation.
Depending on the services available in your local area, you may also have a third option that falls somewhere between those two: going to a non-profit debt advice clinic, and letting them help you with your consolidation. If this choice is available to you, go for it: an advice-giving organisation will be able to tell you which of the many lenders are the most reliable, and help you to avoid some of the pitfalls in debt consolidation.
Let's take going it alone first. DIY debt consolidation involves finding yourself a new loan, from any lender available, and using the lump sum they pay you to get rid of all your other debts. First off, there's a slight niggling problem in that when you apply for the new loan, you'll already be saddled with your existing debts, and so the lender may not want to give you a loan. To them, it'll look as though you're twice as much in debt as you are, because it isn't obvious (or provable) to them that one of the loans is being used to pay off the rest of them.
But that's not an insurmountable problem, and it's quite possible that you'll be able to get this loan. Next step is simply to go through all your existing debts, and pay them off, using the proceeds from the consolidation loan that you've just taken out. You'll need to set aside several hours for this process, at an absolute minimum, because you're going to be spending a lot of time reading small print and trying to find your way around the obstacle course of modern finance.
The second option is to let somebody guide you through the process. You could turn to one of the many debt consolidation companies in the world. Since they specialise in working with debt consolidation, they can give you services tailored to your situation. There's no denying that there are a few crooked operators working in the field of debt consolidation, but there are also some good, reputable organizations that can (in most cases - nothing is guaranteed) savey you money. These organizations can lift much of the administrative hassle of arranging debt consolidation. The downside is that you lose the wide choice of loans available to you from other lenders, which might in theory offer you a better bargain. But that's not always the case, and in many cases you really are better off going through a reputable debt consolidation company.
As with all these choices, it eventually comes down to a point where you need to make up your own mind on how to go about debt consolidation. But I hope you're at least convinced of the breadth of options open to you!
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