Should I Consolidate The Debt That I Have?

Debt can build up over time until it seems overwhelming. One option is consolidation. But debt consolidation can involve getting a loan or becoming involved in a debt consolidation program that will cost money. Before you start discussing consolidation with a financial professional you should make sure that you need to consolidate in the first place.

Considerations

Debt consolidation does not solve your debt problem. Some consumers look at consolidation as a way to make debt seemingly disappear, according to Liz Pulliam Weston, writing on the MSN Money website. Using consolidation can make your debt more manageable by lowering your interest rate and eliminating multiple service charges. But the debt will still exist, and the temptation to run up more debt will be strong when you are left with paid off-credit accounts. Debt consolidation should be a last resort that consumers use when all other methods of getting their spending under control fail.

Getting Organized

For some consumers, the problem with paying bills is all in the timing. You try to pay bills as they come in the mail rather than creating a plan that utilizes your monthly income to pay all of your bills. Create a monthly budget that lists all of your obligations and then creates a schedule for making your payments. Remember to include all of your expenses in your budget including food, gas and repairs. Once you start using a budget you may find that you are able to pay all your bills and save money for future expenses.

Cutting Spending

Some consumers are able to create and maintain a budget but still have problems paying the bills. Track all of your spending for a month and then find ways that you can save money to use on bills. Pay closer attention to grocery store circulars that have coupons and pricing specials to help save money. Walk short distances rather than burning expensive gasoline in your car. Bring your lunch to work each day rather then buying it. Once you cut back on your spending, determine if you have enough to pay your bills or if you need to consolidate.

Creditors

Talk to your creditors, recommends MP Dunleavey, writing on the MSN Money website. They may have programs to get your finances under control. For example, if you explain to your creditors that you are considering paying off your account with a consolidation loan then they may be willing to lower your interest rate to keep your business. If you can get a better deal from your creditors you can avoid debt consolidation.