Debt Management: Is Debt Consolidation Good?
Getting out of debt is easier said than done, but debt consolidation can help under the right circumstances. When used as part of a comprehensive debt management plan, a debt consolidation loan or program can help you streamline bill paying and track your progress as your debt decreases.
Debt Management: What’s involved?
Debt management doesn’t work unless it includes these approaches for managing, repaying, and eliminating your debt:
Establishing and keeping a cash based budget: Knowing how much income you have and how much you must pay out each month to meet living expenses and pay your debts is the starting point for revamping your finances and managing debt. Credit counseling and debt consolidation programs also emphasize the importance of emergency and long term savings. Tracking what and who you owe: Setting up a spreadsheet or other tracking system helps you prioritize, pay, and manageyour debt. You want to list who you owe, how much, the annual percentage rate (APR), and minimum monthly payment for each debt. Schedule payments for a few days prior to their due dates to avoid penalty fees. It’s also important to keep track of payment amounts and dates. Know where you are: If you find that making minimum payments puts your cash budget into the red, it’s time to get debt help. Consumer credit counseling services can help you work out a debt consolidation plan with affordable payments based on a cash budget. Know where you want to go and how to get there: Freedom from debt can require time, effort, and sacrifices; you have to give up instant gratification to stay on track and live within a cash budget. Credit counseling and debt consolidation programs typically require closing all credit card accounts as a condition of participating in their programs, but if you can’t pay off your debt without help, these services can help you get and stay on track toward managing and paying off high cost debt. Avoiding trouble along the way to being debt free: Desperation can lead to making poor debt management decisions; taking out new credit to pay off old bills can easily lead to more debt. Credit card balance transfers can help with debt consolidation only if you monitor low introductory rates and can completely avoid making additional credit card purchases. Contact a certified credit counselor for help with unmanageable debt.
There is no shame in asking for help with getting out of debt. The sooner you begin a debt consolidation and/or credit counseling program, the sooner you can be debt free.
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