Debt Consolidation

A Guide to Consolidating Debt

Consolidating debt is the process of taking a number of older debts and combining them into a single monthly payment, and can be a welcome alternative for individuals who feel that they may have no options available to them other than bankruptcy. By consolidating debt, you can reduce the total amount that you have to pay each month, prevent further damage from being done to your credit, and even begin the process of repairing your credit score. The information below should help you to decide whether it is right for you and guide you along the path to beginning your debt consolidation.

How Consolidation Works

When you decide to begin consolidating debt, you’re going to be combining a number of older debts with separate payments into a single monthly payment. This can be accomplished in a number of different ways, including borrowing money for the consolidation and using credit card balance transfers to combine several credit card balances into a single balance. Regardless of the method that you use, the end result will be a reduced number of payments being due each month and more money being available to keep your debts up-to-date.

Choosing a Consolidation Method

Deciding which method to use depends largely upon your personal financial situation and the types of debts that you’re wanting to combine. If you’re simply wanting to reduce the number of credit cards that you have and can take advantage of one card having a lower interest rate, then you’ll likely be best served by combining your credit card balances via a balance transfer onto the lower rate card. If you have more diverse debts or simply want to pay off some of your older debts instead, then you might want to try and take out a loan with which you can pay off the debts and begin making a single loan payment instead.

Credit Repair

Regardless of the method that you choose, you might find that it’s the first step toward causing great improvements in your overall credit score. In addition to stopping your various older debts from continuing to make negative reports to the credit bureaus for any late or missed payments, you can also begin establishing a positive payment history for your new loan or credit card that will slowly but surely start to have a positive effect on your credit score. The changes may seem small at first, as the older negative reports will still be present as well; as time goes by and the old negative reports begin to expire, however, then your new positive reports will start to have a much greater influence and you may find your credit score improving significantly in a relatively short period of time.