Not a Quick Fix but a Step in the Right Direction: Debt Consolidation

A Credit Article Contributed by Cathy Wilson

Debt Consolidation for Dummies

You're in debt and can't find your way clear so perhaps you are considering debt consolidation. If you are like millions of people all over the world, you have fallen prey to the seductive call of credit card companies who promise lots of money right NOW, never letting you realize that you will be spiralling into uncontrollable debt. Those credit card bills arrive every month and if you miss a payment or pay late, your debt may get so high that you will never find your way out.

Debt Consolidation is One Answer

If you're in fairly deep in debt, you may want to consider debt consolidation. Being in debt is probably the hardest ongoing problems you can get yourself into. You are paying large amounts of interest, you are probably sending your credit rating into the toilet, and you carry the constant stress of owing too much money to too many people.

Simple Do-It-Yourself Debt Consolidation

Many people take the easy first step of debt consolidation by transferring the balances of their high-interest credit cards to a much lower-interest card. Their total monthly payment may be similar to what they were paying all the companies together, but the interest will not be burgeoning out of control. If you choose this way of debt consolidation, be sure that you make your payment on time every month.

Home Equity Loan As Debt Consolidation

You may choose to get a line of credit based on your home equity. What it means is that you are taking money right out of your home equity and applying it to your debts. Sometimes this type of debt consolidation can be done through a refinance of your home; you take the money right out and apply it to your debts. The downside of this type of debt consolidation is that you are removing money from an important personal resource -- your home.

Debt Consolidation Using Your Insurance or Retirement

You can also take money out of your life insurance or retirement funds. This may look like a good option till you realize that that money is GONE once you apply it to debt. It is hard to build up retirement money and it takes a long time to accumulate money in your life insurance plan. It is a severe remedy to take money out of these funds.

Debt Consolidation Counseling

You can always contact a local or online debt counselor to discuss these or other options of debt consolidation with you. They may recommend taking a loan out with a credit union loan, working with their company to make offers to credit card companies to reduce your interest, take money out of your equity, and more. Whatever you do, investigate all the options and consider the longterm effects of each.

And once you are out of debt follow this simple rule: never spend anything that you cannot easily pay back. Every month. On time. That's the rule of credit cards that can keep your money safe and healthy.

Debt Consolidation is the Door out of Debt

Now that you have consolidated your debts -- don't let yourself get into debt again. That's the only way to make your credit cards really work for you.