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Two Paths to Debt Consolidation
By Kari Johnson on April 18, 2011

merge-(1).jpgIf you are in debt, like many Americans, you probably owe money to more than one company.  In the aftermath, you may end up with multiple bills to pay every month, growing amounts of collective interest, and multiple collectors calling you, if it reaches that point.  To limit this stress, many people have resorted to debt consolidation.
Debt consolidation is the process of organizing your debt in such a way that you only owe money to one creditor rather than the multiple creditors you began with.  You only have one bill to pay, and might be able to do something about your interest rates as well.

The most popular way is through a debt consolidation loan.  In this plan, you take out a loan for the amount you owe and pay off all of your debts.  This leaves the desired result of only one bill to pay each month and, if you do it correctly, you can sometimes get a lower interest rate than you have with your individual loans.  The pitfall to this method is that, if you are having problems with debt, you may not have a high enough credit score to receive an unsecured loan and secured loans can present a danger if you have problems paying in the future. 

The other choice many Americans use is to consolidate your bills, specifically when they are all credit card debts, with a new credit card.  Obviously, the amount you owe will determine whether or not this method could work for you.  In this method, you would put all of your debt onto one card.  This is really best if you only need a short reprieve from interest rates, because you can find some credit cards with an introductory rate of zero percent.  If you can pay your debt off during that introductory period, it will save you a lot of money in interest in the long-run.  On the other hand, if the interest rate in the long run is higher, it will cost you more money, so be extremely careful when using credit cards for debt consolidation.

These are two ways to make your debt a little easier to deal with, and even save you money in the long run if done properly.  If or how you consolidate your debt is a big decision, and you should research your options before deciding if this is what you want to do with your debt.
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