by Shauna Arthurs

Created on: December 13, 2008

6 Tips for Informed Debt Consolidation

The debt consolidation industry has grown in leaps and bounds over the past couple of decades. If you are in over your head with excessive debt and are considering bankruptcy, it is advisable to look into debt consolidation as an alternative. Debt consolidation involves the pooling of all of the smaller, individual debts you owe into one larger consolidation loan,' allowing you to make only one hopefully affordable payment and to eventually pay them all off.

While debt consolidation can seem like a debt relief dream come true to someone stressed with money issues, there are some caveats. Debt relief is almost always a better alternative than bankruptcy, however there are potential pitfalls you need to be aware of. As with any pursuit, an informed consumer is one who will win out in the end. Let that be you!

Here are some tips to consider as you navigate the debt consolidation information available to you:

1. Keep in touch through this process. Although the last thing you may want to do is speak with your creditors, it is important that you maintain your reputation with them. Call each of them and explain your situation, and that you will be consolidating your debts in order to ensure you can pay them. Some creditors may even wish to negotiate with you individually, so you may want to make these calls as a last-ditch effort before you go through with the consolidation. Perhaps with a few phone calls you can have some of your interest rates or payment amounts lowered, and avoid debt consolidation altogether.

2. If you find it necessary to take the next step, debt consolidation is almost always preferable to bankruptcy. This is in large part due to the fact that your credit rating otherwise known as your financial report card, and used by potential lenders and employers as a way to judge your creditworthiness is not adversely affected by a debt relief loan. If done right, your credit report will show the history of someone who makes good on their debts and does whatever it takes to pay them off. Bankruptcy, on the other hand, effectively ruins your credit for the next 7 to 10 years, depending on where you live. You will have little chance of receiving credit cards, loans for purchases such as cars and houses, etc., with a bankruptcy on your credit history.

3. Not all debt consolidators are equal. Some truly act in your best interest, and others don't. Shop around and ask around. Check with everyone you can think of who may have

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