This is a question that many people find themselves asking these days. However, due to the amount of misinformation, it is quite easy to go down the wrong path. We are going to try to present both alternatives to you so you can make the decision that is best suited for your specific situation.
Debt Consolidation loans are a very good opportunity under the right circumstances. Because a lot of people in debt have bad credit, this is not always possible for them. Do not fall into the trap of getting a debt consolidation loan merely because it allows you to have only one payment. There can be hidden costs or interest rates that can end up doing more harm than good.
The Internet is littered with sites offering debt consolidation loans to anyone, regardless of their credit history. Nothing comes free in this world, so you really need to look at these loans carefully before filling out the application. If the loan has a higher interest rate than your current cards or significant application fees that will offset much of the savings, you should look for other alternatives.
If you are able to get a loan that has a lower interest rate and the payment schedule works for you, by all means, take the loan and save money. This can lower your monthly payments, which will allow you to actually save money while you are paying off your debt.
Once you are able to get back on your feet, you can always make larger payments than scheduled in order to lower the principle
Debt management services have been given a bad reputation for quite some time, and for good reason. This is an industry that is filled with sharks; however, there are some legitimate companies out there that will actually help you get your debt under control.
You just need to know what to look for in order to separate the frauds and scam artists from the legitimate companies.
These companies are going to charge you a fee for their services. This is the first consideration, in that you need to make sure the savings offered plus the fee are not equal to or more than what you currently owe. This is where most of the companies lose their attractiveness and something in which you must be well-versed in order to realize if they are ripping you off or providing a worthwhile service.
For the reputable companies, a major draw is that they will have agreements in place with most creditors to freeze interest rates and penalties
At the very least, they will be able to get your high interest rates lowered to rates that are more reasonable.
It is recommended that when you approach one of these companies, you ask them about the companies with which they have a working relationship. If they do not have something in place with your creditors, make sure you have an agreement before turning over your debt payments.
In addition, the company should be able to work with you in order to get your budget back in line. By this, we mean they should have counselors that can evaluate your specific situation and set you up with a plan that will enable you to get your debt under control and avoid this situation from happening again.
If the company meets these basic points and you have no other alternatives, this may be your best bet to get out from under your debt.
The drop off in average income factor:
Learn more at the UK Debt Management Office (DMO)