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Personal Debt Consolidation - Can You Become Debt Free?

Mar 8, 2008
When hearing of consolidating debt we often think of businesses but getting debt under control and manageable can get personal also. The growth in the market for managing dent on a personal level has grown tremendously as more and more American consumers accumulate larger debt with unmanageable loads.

Consolidating personal debt is no different than for a business. It usually begins by obtaining a loan for the total of all the open balances on credit card accounts and store charge cards. This loan often comes with a lower interest rate allowing more of each monthly payment to go towards the amount owed.

All the accounts are paid in full with only one payment needed to be made making debt management much easier. Also easing the money squeeze is a reduction of the monthly payments.

Another method also will require a loan but will be done through a consolidation or credit counseling organization that will work for you by negotiating with your creditors for lower interest rates on the unpaid balances. They may in fact be able to get the interest waived on the unpaid balance.

In turn you will pay the counseling service each month one payment and they will in turn pay your creditors on your behalf. This should lower the payments each month and allow you to put some money away in the bank as you pay off your debts.

Loans to reduce debt can help some short-term problems but long-term issues of money management need to be addressed. There are also related health issues debt can bring on like anxiety, stress, less sleep and relationship problems.

Before going down any path dealing with personal finances it is important to educate yourself on what is truly involved in the debt loan or credit counseling process.

The route of a personal loan can provide the financial assistance a person facing huge debts when compared with their ability to pay is hanging over their heads. These debt loans may look very attractive to consumers with the intrigue of making only one payment instead battling with every creditor all during the month and at different rates of interest.

In addition to this, the interest rates you negotiated as you pay the consolidation service are actually tax deductible. But there are some criteria you'll need to meet to be eligible for a loan designated for debt consolidation.

After your current financial condition is reviewed, the debt consolidation service will determine whether or not you qualify for a loan. Check the interest rate! These loans can carry a lower rate than what you are currently paying but still have an interest rate in 12 to 15% range, which not everyone can make payments on.

If in their view you cannot reasonably make the payments they will either show you a different structure for payment or reject your loan application altogether.

This could happen but rarely and if it does, you do have the option of seeking out the services of consolidation companies who are not as adverse to the risk.

The way to a debt free life is not an easy path but the financial freedom you can experience is worth the pain and effort.
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