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Debt Consolidation - What is it?: At some point in all our lives we will probably get into debt, but it's the ones that handle it better that are more prepared to buy homes, cars, etc. The problem with American society is this mass consumerism that temps even the youngest of kids into wanting to buy the latest gadgets and go into debt to own things. College students are offered credit cards at an alarming rate these days and the recent debacle in the mortgage industry shows all of us that many people just don't understand debt and how to pay it off in a timely manner. For years homeowners have refinanced their credit card debts and other loans into their home mortgage to lessen the monthly burden of high interest rates and even higher payments. That may have all come to an end as the lending practices of many banking institutions has been front and center on the news of late. No longer are people able to consolidate debt like they used to. There are still dozens of debt consolidation programs and services out their that are non profits out for your best interest. At the same time, there are 100's of ruthless debt consolidation companies that only want to make your situation worse by using your vulnerability against you. We have heard countless horror stories of people paying large up front fees to 'consumer debt consolidation' services only to find out that they company was unable to manage their debt any better than they were. Unfortunately when people fall behind on payments and become late on things like their mortgages they panic and become desperate for any solution. When you consolidate your debt you are essentially taking things like car payments, credit card debt, student loans, medical bills, etc. and putting them into one large loan that has a smaller monthly payment that is usually more affordable than paying all them separately. The real key when working out a consumer debt consolidation is to make sure the interest rates are low enough that you can afford payments going forward and avoid bankruptcy. Some organizations will charge a fee to setup these consolidate loans for you and negotiate on your behalf while others (see below) charge no fee and run as a non-profit consumer protection agency. Some services are offered through websites, but we highly recommend that you investigate all sites before signing up for any deal. The best agencies are those that offer a financial counselor who will sit down with you and work out the details of your debt and find the best solution based on your income level and past payment history. In talking to those behind on payments in online blogs we heard about debt collection agencies harrassing these people night and day with phone calls and offers. Stop worrying about the next phone call and get started on fixing your debt problems. We found Debtconsolidationcare.com to be a very informative website with pros and cons to the different ways to take on debt consolidation. Free Debt Consolidation: Non profit, or free, debt consolidation companies are hard to find and the Federal Trade Commission (FTC) has an educational web page on "Facts for Consumers" HERE. The FTC does a great job of going into credit counselors and debt management plans and discussing non-profit organizations that claim to be "FREE". Some are legitimate while others are just scammers looking to take any last money you may have. The FTC clearly says you should "check it out with your state Attorney General, local consumer protection agency, and the Better Business Bureau" before doing business with any company. Another thing to understand is that there are various ways that these agencies manage your debt and some are better than others in terms of maintaing your credit scores which ultimately decide what type of interest rates you get on loans in the future. Some companies are able to negotiate or even have your debt written down which is great in the short run but can damage your credit scores down the road. If a company is forced to write off your debt as "bad" then that reflects on your FICO score. The best solution is to find a way to make payments each month and even get a better interest rate so that it is doable. For a consultation with a reputable debt consolidator or credit counseling agency go to nfcc.org (National Foundation for Credit Counseling) or call them at 800-388-2227. They can give you advice on your debt and point you to the best debt consolidation agency in your area. Bad Credit Debt Consolidation: The worse your credit, the harder it will be to consolidate any debt you have. The risk to lenders becomes just to great which is the ironic part of this type of mess. The lenders gave you credit cards and mortgages knowing you would probably fail and now they won't let you consolidate the loans or lower your interest rates to help. My parents always said to be careful of any bank or credit institution that will loan you money since they will essentially loan you enough to get you into trouble. Always take less than is offered to play it safe. Those of you with bad credit will need extra help in securing a debt consolidation. I really like the Eloan.com website for information and help on obtaining a loan when your credit is not very good. Their debt management page has a debt relief calculator to help you determine what kind of monthly payment you can afford and they offer budgeting and planning programs to get you back on track as you pay off your debt. There is no doubt that paying off debt is better than settling for bankruptcy, but you need to find a program that works for you. Student Loans: The real trouble starts for most of us when we get our first credit card(s) sometime around the college years. Campuses are busting out with credit card offers and students seem to accept these deals at face value. Students get into debt via credit cards and student loans to go to school. Without a serious job, these loans can get out of control in a hurry and not too long after you get out of school these education loans are due. Our advice to college age students is stay out of credit card debt. It's a terrible cycle to get into where you mortgage your future to have things now. There are government run programs that allow students to get loans for education that have pretty low interest rates. There are Federal PLUS Loans, Federal Stafford Loans, and Perkins loans. When you get a student loan consolidation you are taking all the federal loans you have taken out over the years and put them into one loan with 1 monthly payment. It can simplify things a lot, so check out sites like Estudentloan.com. Avoiding Bankruptcy: You will hear people say that declaring bankruptcy is a better choice than paying off thousands of dollars to your creditors. If you are able to see credit as a lifetime issue, then you would almost never choose bankruptcy. Sure, you can eliminate all your debts by filing for bankruptcy, but when you are able to reestablish your credit down the road you will always be paying higher interest rates on cars, credit cards, and houses than the guy next door. Once you file for bankruptcy you could be costing yourself down the road. The best solution is to negotiate with your creditors (they would like to get paid) and see what is a possible outcome for future payments. They will often reduce interest rates, write off partial debts, and even let you miss a payment here or there to get their money. © 1999-2008 Funskins.com - Product Reviews