Decide Which Debt Consolidation Option is Best for You
When you want to try and control your mounting debt, it’s time to look at your debt consolidation options, all of which offer their various pros and cons. Keep in mind your objective of turning all your monthly bills into one easy monthly payment, with, hopefully, a lower interest rate as you consider which debt consolidation option below might be right for you.
Debt Consolidation Option #1: Credit Counseling/Debt Consolidation Services
This debt consolidation option can be broken down into two types: non-profit debt consolidation groups that work with you to develop a strict budget in an attempt to limit your spending and pay off your bills and creditors; or for-profit credit counselors that do the same for a monthly fee. They also negotiate lower interest rates for you and pay your individual accounts for you while you make one monthly deposit to an account that they manage for you. Usually you have to close or suspend all credit cards while in the debt consolidation program. Paid programs may also offer incentive programs, consumer education programs and letters of reference when you complete the program. Links to check out are American Debt Resources, Credit Card Consolidators,
National Legal Debt Centers and Debt Advocates.
Debt Consolidation Option #2: Home Equity Debt Consolidation Loans
This debt consolidation option uses loans that rely on the equity in your home as collateral for a loan. If you have owned your home for a number of years and it has appreciated in value, you can use the equity for a low-interest home equity loan against that value to consolidate your bills into one payment. Those who opt for this debt consolidation option should look into sites like My Home Equity.
Debt Consolidation Option #3: Personal Bankruptcy
Personal bankruptcy is the most drastic debt consolidation option and should generally be considered only when there is no way you can pay your debts, no matter what alternatives can be negotiated. Bankruptcy stays on your credit report for ten years, making it nearly impossible to get credit, buy a home, life insurance, a car or sometimes even get bonded for a job. This debt consolidation option will, however, wipe the slate clean if you are so far in debt you can't survive otherwise. In most cases, you can keep your home and one automobile.
How do you know which debt management solution is best for you? By looking into every debt consolidation option and weighing the pros and cons of each one. Just keep in mind how each debt consolidation option might play out should your worst case scenario happen - as well as your best case scenario.
