Debt Consolidation Loans: A Last Resort
By Ray J. Walberg
No one ever wants to be in debt but it happens and at that point bill consolidation is the answer. It can help take back control of your finances and stop letting that debt the quality of your daily life. Debt can occur through unexpected medical bills, education expenses, credit cards, personal loans and home ownership. If you have not been able to handle the debt yourself, it is first important to assess your situation and the total amount of debt to determine the best way to pay it off. Debt consolidation is more than likely the way to go as compared to the option of bankruptcy and it should be considered, but you very well could handle your debt on your own which is why it is important to evaluate your financial situation.

Included in your evaluation of your options and the best route to take in paying off your debt is the importance of understanding the basics of bill consolidation. Simply put, debt and bill consolidation is the process of totaling your outstanding debt, and assessing your situation is a determination of the amount you can afford to apply each month to this debt. Look at your income, total monthly debt, total monthly payments and the total amount of debt to be included in the bill consolidation.

You should next determine the percentage of your debt and consolidation total for each creditor, which is important in order to find the best offer the creditors make to reduce your payments. Lower interest, reduced payments and sometimes a reduce payoff amount are all possibilities during negotiations with creditors. For example, if your debt and bill consolidation total is $5,000 and you are required to repay a particular creditor $400 per month, take the $400, dive it by $5,000 and multiply the result by 100. This will give you a percentage, which is 12.5% in this example. You then know that 12.5% of your debt and bill consolidation total is due to that creditor. If your disposable income after subtracting essential expenses is $1,000 per month, you can afford to pay this creditor $125 per month. One thousand multiplied by 12.5%. The average amount paid each month from debt consolidation, as compared to paying the creditor yourself, may



or may not be less than, for example, the $125 above. If it is not, debt consolidation may not be the best way to payoff this creditor while it may for others. Or, the negotiations the consolidator is able to make with the creditor may result in a much lower payment and reducing your debt through debt consolidation is probably your best solution in this case.

It does not hurt to contact the creditors yourself and try to negotiate a lower interest rate and reduced payments. Often if you explain your situation, they will work with you. It goes without saying that bankruptcy should be the last resort but debt consolidation may not something to jump into right away.

Ray Walberg writes articles predominantly for www.creditenio.com , a web publication with topics around consumer debt repair . His contributions on debt relief consolidation can be found on www.creditenio.com/debtrelief.html .