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How Does Debt Consolidation Help Someone With Existing Debt

20/12/2011 by Brian Talbot



If you see that your credit card and loan payments are beginning to eat up the bulk of your monthly budget, debt consolidation may be the answer.

However, there are a few things to consider before deciding to go this route.

Some of these factors are:

How many credit card and loan payments am I currently making?

How high is my interest rate?

What is my monthly budget?

How good is my credit?

Let’s address these issues one by one and see how they pertain to using debt consolidation.

How many credit card and loan payments am I currently making?

If you are paying off a single card or loan, debt consolidation may not be the answer. By time you pay transfer and application fees, the savings earned though debt consolidation will probably have been absorbed. Instead, try contacting the current lender to see if they will consider lowering the rate. Consumers are often surprised by the lenders willingness to lower the interest charges rather than risk the payment going into default.

How high is my interest rate?



The interest rate on your current loan and credit cards will be a large part of this decision, especially if you are using bad credit credit cards. Many of these cards charge upwards of 24.99 percent or higher. Debt consolidation loans are often available for under ten percent. That savings will add up rather quickly and allow you to get out of debt quicker.

What is my monthly budget?

This issue actually ties into both of the previous questions. When people begin to have multiple accounts to pay during the same month, they end up paying the minimum due on their cards and barely make a dent. Getting a debt consolidation loan allows all of those payments to be lumped into one bill and knock down the principal that much quicker. In fact, people are often able to lower their bills budget, but still reduce their debt quicker!

How good is my credit?

Your credit will be a major factor in deciding if debt consolidation is even possible. If your debt load has forced you to skip a bill, thereby lowering your credit score, getting a debt consolidation loan may not even be a possibility. If this is the case, debt counseling may be the better route.

Counselors specializing in this field may be able to renegotiate interest rates and payment schedules to allow you to make all of your payments every month instead of picking and choosing which payments will be made.



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