Chart Your own Course with a Debt Consolidation Program

A Credit Article Contributed by Mark Mcclelland

What is a Debt Consolidation Program and Can I Do It Myself

Basically, a debt consolidation program is the combination of a process and a plan. The process part combines multiple unsecured debts - typically your credit card balances due, any personal loans, and your unpaid medical bills - into a single larger debt, and the plan part is a repayment schedule to repay that single larger debt in monthly installments. One of the primary benefits is, of course, that instead of your having to make multiple monthly payments - one to each of your creditors - you'll only have to make one.

And although the explanation makes it sound simple, it might not be - depending on your specific circumstances. To be sure, coming up with a re-payment plan isn't necessarily all that difficult, but combining all of your existing unsecured debt into a single larger debt might prove to be a bear.

But, in spite of what you might read on the Internet, putting together a debt consolidation program doesn't actually require a professional; you could do it yourself, but you have to have the patience and determination to see it through if you want to derive any benefit from it at all.

How Do I Start Putting Together a Debt Consolidation Program?

The first thing you need to do is figure out how to combine all of your current unsecured debts into one larger debt. What this step entails is paying off all your current unsecured debt creditors, and accumulating those pay-off balances into a single larger debt. Fortunately there're a number of options available to you when you try to put together your own debt consolidation program this regard, and some are listed below in no particular order of "bestness".

You can try rolling all of your current credit card balances dues onto a single card, hopefully one of those with a 0% introductory interest rate, followed by a low interest rate APR. But even if this option is available to you, you might not be able to roll any personal loan or medical bills onto this low rate card. So this option works best if most all of your unsecured debt is credit card debt.

You can apply for a second mortgage on your home. In this way you'll be putting your most valuable asset to work for you. But you should be sure to pay off this second mortgage as soon as possible so that when you sell your house you only have your primary mortgage to deal with; otherwise you'll have to pay off both mortgages when you sell, possibly eliminating whatever equity you've accumulated over the years.

You can try to get a personal loan. If you're a member of a credit union this may be a viable option since credit unions tend to have the lowest rates for personal loans. But you should understand that even with a really good credit score, you might be paying 14% to -15% for this loan; if your have a less that stellar credit history you might be paying 18% - 21%, putting this particular option out of the range of reasonableness.

There are other options as well: for example, if you have other assets that you can borrow against, or you have particularly generous friends or family (although this is a good way to loose friends and alienate family).

But whatever method you choose, you should be sure to get enough to pay off your current unsecured debts, but no more.

How Do I Develop the Repayment Plan for My Debt Consolidation Program?

This is actually the easy part. If you rolled you debts onto a single credit card, or took out a loan or a second mortgage, the repayment schedule is set for you. But a few words of caution are in order. You should pay off the debt consolidation loan as soon as possible, by digging as deep into your pockets as you possibly can. This is the only way that you'll actually derive the maximum benefit from your program.

If you make minimum payments to the source of your funds, you'll end up spending 20 or more years paying off these debts. And that's not a repayment schedule you want to be saddled with.