Debt consolidation is one choice to help you reduce your financial obligations

The credit industry has made it very easy to borrow money during the last ten years. In the early to mid 1980’s, establishing credit was rather difficult. You needed a job, a history of paying your bills and a creditor who was willing to take a risk on you. Not anymore. College students who have never had a job in their lives often find themselves staring at “pre approved” credit card applications. And without much in the way of formal financial education, many of them take the cards and spend like crazy, running up thousands of dollars in debt before they even know it. You might be one of them. Or you might have had an accident or illness that left you without the ability to work. What can you do if you have too much debt? What do you do if your monthly bills are more than you can pay? 

There are several options available from which to choose:

Borrow from someone. Do you have parents, friends or other relatives who can lend you the money to pay your debt? Shakespeare suggested that one should “Neither a borrower nor a lender be” but sometimes a friend with some cash can help. Friends often offer better terms than professional lenders. Of course, if you fail to pay them back, you may have done irreparable harm to your relationship with your lender. This is one option, but use it carefully.

Debt consolidation loan - There are companies that specialize in offering debt consolidation loans. This option takes several debts and combines them into a single loan, which, if you are lucky, has a lower interest rate than the other loans you may have. By combining several loans into one, you can more easily pay off the balance. This method is especially helpful in that the minimum payment required is probably less than the sum of the minimum payments from separate loans. Be aware that a higher interest rate or a longer term may mean that you actually repay more money in the end.

Debt settlement - It is possible to negotiate with your creditors under some circumstances. If you haven’t been making payments, you can probably arrange somewhat more favorable terms with your creditors by simply calling them and talking to them about it. They may agree to lower your interest rate or they may even agree to settle for a lesser amount. Be aware that if you do pay less than the amount owed, it will be marked as such on your credit report. If you pay in full, it will be shown as “paid as agreed” which is a much better mark to have on your report.

Credit counseling - These are agencies that will help you manage your bills. What they offer, more than anything else, is education. Some may offer to lower your debt; some even advertise that they can cut your debt in half. They cannot, and companies that offer such promises should be avoided. On the other hand, they may be able to provide you with help getting your finances in order so that you can avoid this problem in the future.

There are several options available to people with financial problems. You should use the one that works best for you.

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