Is Debt Consolidation Right For Me?

Online, October 13, 2011 (Newswire.com) - Debt consolidation is, simply put, to take out a single loan to pay off others. Many people choose this route because they are able to get a lower interest rate, they can afford only one monthly payment or they need to decrease their total monthly loan payments.

But is debt consolidation or debt negotiation really a good idea? If you are planning to consolidate unsecured loans into another unsecured loan in order to achieve more favorable terms, then the answer is yes. But if the situation involves secured loans, then you will have to use an asset as collateral, putting your assets at risk. This is not a good idea.

But if consolidating means you can afford the payments for the term of the loan, you may want to consider this option.

When you are seeking debt consolidation options, there are certain things you should be looking for. If you're in danger of bankruptcy, you should be aware that lenders will sometime discount loans. This can be a very good thing for you. Look for those types of deals.

When trying to determine what debt consolidation plan might work best for you, be sure to figure out how much you owe on your current debt, including interest, and compare that to the debt consolidation plans you are considering. If you are consolidating credit card debt, don't open a new credit card in order to consolidate. You'll likely run into more debt and, as a result, more trouble.

If you are considering debt consolidation just because it would be a more convenient way to pay off your debt, and it will save you money, then you should proceed. But there are some instances in which you should not consolidate your debt, or in which you should proceed with much caution.

Very often, debt consolidators will use your home as collateral. If the housing market isn't stable, you may want to reconsider consolidating. Hold off for a while, and wait until things stabilize, and you will have more equity in your home. This will lead to a better deal.

Consider your budget. If you are having a lot of trouble paying your bills and a debt consolidation plan wouldn't make things any better, you may want to instead consider bankruptcy, or look at a Chapter 13 restructuring bankruptcy, which would put your debt into a discounted state.

But if debt consolidation is your only hope, other than bankruptcy, you should instead work to pay your bills for a few months, paying on time, and even above the minimum whenever possible. This will put you in a better position before you consolidate and in the long run.