by Marco Angioni II

Created on: January 14, 2008

Debt consolidation can offer many great benefits, such as a lower monthly credit card payments, reduced interest rates, the prevention of being assessed late and over-the-limit fees, and faster debt reduction, to name a few. However, there are also some disadvantages that accompany debt consolidation, such as a freeze of your credit using privileges, closed credit accounts, and consolidation fees. Knowing how to weigh the positives against the negatives and becoming completely (or as well informed as possible) informed about consolidation are two important factors you need to consider before making a decision as to whether or not you should consolidate your credit card debt.

The first factor you should consider is the amount of your credit card debt. Many consolidation companies require that you have a minimum of $5,000 worth of credit card debt before you are allowed to participate in the program. Some companies require at least $10,000 worth of debt. The point is, if you have only a relatively small amount of credit card debt you can probably work the problem out by yourself. Additionally, because these debt consolidation companies charge an "administrative" fee every month, the longer it takes you to get out of debt equates to more money for the debt consolidation company. Therefore, they are not willing to help people who are only $1,000 or $2,000 in debt because it is not profitable to the debt consolidation company.

It is true that the debt consolidation company will combine all of your monthly debt payments into one monthly payment that you pay to the debt consolidation company who then distributes the payment to the various credit card companies. Additionally, it is true that the debt consolidation company will work with your creditors to lower the interest rates on your outstanding debt accounts. However, what they do not tell you is that sometimes credit card companies do not change the payment due date for your account. Thus, if your single monthly payment to the debt consolidation company is due on the 5th of the month, but one of your credit accounts is due on the 4th of the month, you may incur a late fee. Make sure that this situation is remedied before you start making payments to the debt consolidation company.

One of the negative aspects of debt consolidation is that your credit score will be lowered because all of your credit card accounts that are in this program will be closed. Closed credit accounts lower a credit score. Additionally, the

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