by Denise Loar

Created on: December 16, 2011   Last Updated: December 20, 2011

Making Debt Consolidation Work for You

It’s no surprise that in today’s economy more and more people are finding themselves with climbing debt and less and less money in their bank accounts. With the financial crisis that is flooding the world it is increasingly important to know what options are available to the average consumer to handle their mounting monthly obligation. Consolidation done wisely can be the light at the end of the tunnel that so many of us are struggling to find.

The first step to consolidation is actually figuring out what you owe, what your minimum monthly payments are, and what interest rates you’re paying. There are two main goals with consolidation: lowering your overall interest rate, or lowering your total monthly payment. There is no point in consolidating debt if you’re going to increase either of these two things, with the one exception applying to promotional interest rate offers. Be sure to check the rates particularly on your credit cards; interest rates can fluctuate depending on the type of transactions that are done with a credit card, and depending on whether or not you’re involved in a promotional situation. With special offers on credit cards consider whether or not you’ll be able to pay the balance in full before the low rate expires. Be honest with yourself; if the answer is no, then that balance should be included in your consolidation.

Once you have all of your financial information gathered in one place, make a list with four columns. In the first column list all of the bills you would like to consolidate, in the second list what interest rate you are currently paying, and in the third and fourth columns list your required minimum monthly payment and what you are actually paying every month. Consider whether or not you make larger than your minimum monthly payment, only to turn around and use the money you’ve put on your card right away. If this is case, your minimum monthly payment and actual monthly payment should be the same, because in reality you are not paying anything additional off on your credit.

With all of this information listed in an easy to read chart, it’s time to head into your local financial institution. Some places will require that you make an appointment to come in for a face to face consultation to discuss your situation, and some will allow you to go through this process over the phone. Consider what is available to you, and what will be easier.

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