The Blog Of TL Wall Accounting

Should You Do Debt Consolidation?

Almost everyone at one time in their lives found themselves having trouble paying all the bills. Even if it wasn’t true, because you hadn’t verified your income versus how much you owed, you probably had some discomfort when it came to a question of whether or not you were managing your money properly.

If you ever find yourself in trouble, you have a few options.

3D Shackled Debt
Creative Commons License
Chris Potter via Compfight

One is to ignore it and wait for the phone calls to start coming in; we wouldn’t recommend that.

Another is to borrow money from friends and family. This might be a solution but, unless you don’t have to worry about paying them back, it can end up in family strife and probably isn’t a great option.

The best option is to look at some kind of debt consolidation program or process to help get out of debt, or at least to get some control of your finances so you at least know what’s going on.

We’ve talked in the past about things one should do when you’re having problems with bills, and those are great first steps. Being proactive is always a better option than sitting around feeling nervous and scared and waiting for things to happen.

One thing you can think about doing is, if most of your debt is in credit cards, moving balances to the cards with the lowest interest rate. While this doesn’t quite eliminate debt, it will give you fewer payments, lower total payments overall for a while, and if you can make larger payments you will reduce your debt faster.

The problems here are twofold. One, you might already be close to being overextended, thus this isn’t a viable option. Two, you have to be disciplined enough not to use the cards you clear, which might mean you’d have to do something as drastic as cutting some cards up to stop yourself. You have to do a major self evaluation here; if a lack of discipline is that put you in trouble to begin with don’t even think about this as an option.

Another thing you can do is some credit counseling. You can go to someone like an accountant, who can help you get a handle on your bills and even pay them for you, or set you up to pay things down while putting you on an allowance. Or you can look for free services like Consumer Credit Counseling, who will help negotiate payment terms with your creditors with the caveat that your accounts are closed at the same time. And no, you don’t get to keep a card in reserve, although you can always use your debit card.

A final thing to think about, if you own a home, is a debt consolidation loan via the bank where your mortgage is. This might be harder to do if you have high balances on all of your cards because the bank might not see you as a great credit risk, but if they do extend you credit it’ll end up becoming a part of your monthly mortgage payment, which will be less than what you pay now for your mortgage and bills, and the interest rate will probably be lower also.

The best option overall is to address any potential issues early so you don’t have to consider doing any of these things. Help is always available; you just have to ask for it.

Please Share
Tweet about this on Twitter
Share on LinkedIn

Comments are closed.