Credit and  Debt Consolidation
 

If you are in debt, and having trouble paying your bills, you may be able to lower the cost of getting a loan, or decrease the amount of interest you are paying, by consolidating your debt. This can be done through a bank loan, a home equity line of credit, or by going through a credit counseling service.  Consolidating your debt is something that you can do fairly easily the first time, but it may be difficult if you have a low credit score – for example, if you have made late payments, defaulted on a loan, or have a charge off on your credit report. If you own your own home and have equity in it, you may be able to consolidate your debt through a home equity line of credit. Or you may be able to consolidate through a bank consolidation loan to pay of all of your creditors.

Debt consolidation may also have a negative effect on your credit report if you get a loan, because more loans do not look good on your report.  This should be a temporary effect, as your credit score should improve once you have paid off your existing debt and have more available credit, but you want to make sure to be making on time payments on all of your bills.

Credit counseling services abound, and many can help you to navigate the tricky task of dealing with and negotiating with your creditors. They can also help you by paying your bills for you – you send them one monthly payment, and they pay your bills. If you often make late payments, this can help tremendously in avoiding late payments. It can help you if you are finding your debt payments stressful. Choosing a credit counseling service can be difficult, as some companies can be more effective than others in negotiating with creditors, and some companies can ruin your credit score by not paying your bills for several months. Many companies will be able to do a good job without having any effect on your credit score. Otherwise, you can do your own consolidation, by getting a loan to pay off all of your creditors and then paying off that loan. You can also do your own negotiating with companies once you have the loan – a company may be willing to cancel some of their charges or interest if you are going to pay off their bill in one lump sum. A consolidation loan can give you negotiating power. Many people often find that they can do their own credit counseling, but this can be a difficult task for people whom have already had trouble with making on time payments or whom have creditors calling them.

Once you have paid off all of your creditors, it is important not to charge up all of your credit cards again, if your debt came from credit cards.


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