A debt consolidation program is often recommended for someone who has become unable to pay all their monthly bills.  Perhaps you or your spouse recently lost a job or maybe a medical emergency came up and caused you to get behind on bills.  Sometimes poor financial management and planning can cause a major debt problem.  No matter what your situation, debt consolidation might be a smart solution to prevent further negative effects on your credit.  It can be your first step toward credit repair while also keeping your obligations to creditors.

Types of Debt Consolidation

There are a number of ways to consolidate debt into one monthly payment.  One is to take a cash advance on a low interest credit card and pay off your other bills.  You'll only have the one credit card payment, which may be lower than your overall payments on the debts.  This method is only recommended for smaller debt amounts (a few thousand dollars or less), and only if you know for sure that the low interest rate will be guaranteed for the future.

Another method is to obtain a debt consolidation loan through your bank or other lending company.  For amounts of $15,000 or less, you might be able to get an unsecured personal loan if you have a good credit score.  With a debt consolidation loan, you'll borrow the total amount owed and then pay the balance in full with each individual creditor.  Then you'll only have the one loan payment to make each month.  The downside to this type of loan or a credit card loan is that you will be paying interest on debts that may not have had interest before.

If your credit has already been tainted by your financial situation, you might have to get a second mortgage on your home or secure your loan with other owned property to consolidate debts.  This means you could potentially lose your assets if you were to default on your debts in the future.  So, only choose this option if you feel confident you can make the payments.

Whatever type of loan you choose, be sure it fits your situation and will not cause further stress in the future.  Sometimes a quick fix is not always best, so consider all your options beforehand.

Debt Management Solution

Another option is to manage your debt payments through a debt consolidation service.  When you enroll in a debt management program, your individual debts will not be paid off.  Instead, you'll make one monthly payment to the company that's managing your debts.  In turn, the company will pay each of your creditors.  The benefit of using this service is there is no interest involved and your monthly payment could be substantially lower than what you're paying now.  The debt management service can contact each of your creditors on your behalf and possibly negotiate better payment terms, lower interest, etc.  So, you'll essentially be paying your creditors through the one agency, but with better terms than before.

Be cautious about which debt management service you choose.  Check out the company with the Better Business Bureau, the National Foundation for Credit Counseling (NFCC) and the Association of Independent Consumer Credit (AICC).  These organizations are the best resources for finding reputable credit management services.

Make sure the debt consolidation program you choose works for you and your family.  There's not a "one size fits all" solution.  Every situation is unique.  The important thing is to stop allowing debts to ruin your life and credit.  The sooner you take charge, the sooner your credit score will recover!