Do you have a lot of debt and seem to be stuck in a world of late and over the limit fees with no end in sight? One option that you may be considering is debt consolidation, thanks to the hundreds of debt consolidation advertisements played on radio and television. This is certainly a viable option but before you call the number attached to the next catchy jingle you hear, you should read on, and find out a little bit more about what debt consolidation agencies do and whether or not they are something that will work for your own unique situation.

First of all, let’s explore exactly what debt consolidation is. Well, the purpose of a companies that do debt consolidation consolidate debt. Simple right. Except that its not. What it involves is the company contacting creditors to lower your monthly payments and sometimes – but not usually – the interest that you are paying. Then, you pay the company one fee which is distributed to those creditors. Does it lower your payments….yes. However, there are some problems associated with this method of how to consolidate debt.

First, this is actually something that you can do yourself. Yes, you can consolidate your debts quite easily, by contacting your creditors and explaining that you, for whatever reason, are not able to make your debts and that you would like to figure out a way to get everyone paid. Explain that you are attempting to consolidate your debt and ask if they can do anything to help you lower your monthly payments so that you can get them, and everyone else paid off. You will be surprised how many will work with you, lower your interest rates or drop some fees to lower your monthly payments.

A further thing to keep in mind about companies that do debt consolidation is that your creditors may list on your credit report that you are working with a debt consolidation agency. This will stay on your credit report for quite some time and sends up an automatic red flag to future potential lenders. It says, stay away from this person, because last time they got a loan they weren’t able to pay it, and the companies lost a lot of the interest, fees and other ways that they make money because of a debt consolidation service.

Another thing that may happen is that even if your creditor agrees to consolidate your credit with the company that you are working with, they may still report the payments as late, or worse, the account as closed and the debt unsatisfied. Also, many of these companies use the first, or even second and third payments that you make to go towards their own fees and this means that if you were only a month or two behind you will end up far worse off. There are some debt consolidation programs that can help, but these are all things that you should be aware of before you begin shopping for one.

These tough financial times make it often difficult to meet our financial obligations and loans or payments that we would have had no problem meeting a couple of years ago are now a strain on our finances because of a loss of job, higher interest rates or a reduction in pay. Nowadays, you often hear about debt consolidation, especially applying for a credit card to consolidate all of your debt into one low monthly payment. But what is a debt consolidation credit card and is it a good idea for your unique situation?

First of all, let’s cover what debt consolidation is. Say that you have three credit cards that you are paying on, as well as a mortgage, two car loans and a loan from Bob’s furniture store, for the living room and bedroom furniture that you purchased a year ago. Debt consolidation will allow you to turn all of these debts into one, with the exception of your mortgage, so that you only have one payment to worry about rather than six. You pay off each loan and then make payments on the money you borrowed to pay them off.

Debt consolidation for credit card debt takes the three credit cards that you are currently paying on, and pays them off, putting the balance on your new credit card. This new card may have a lower interest rate, or at the least a lower minimum payment so that you don’t have as much cash going out as you did before. Credit card debt consolidation is a common procedure and companies that offer this service are easy to find. If you have a high interest rate on your credit card debt consolidation may allow you to pay them off, and pay a much lower interest rate on the same principle.

Debt consolidation for credit cards may save you money both in the long run and in the short run. If you take credit cards A, B and C, which each have $1200 charged to them, and an interest rate of 15%, and you put them on credit card D, which only has an interest rate of 13.9%, then you will save quite a bit of money in the long run, as well as some money right away on the payments. Of course, if the interest rate on the new credit card is 19%, this may not be such a great deal even if the monthly payment is several hundred dollars lower than the combined payments for the first three cards.

You don’t have to use a consolidated credit card for just other credit card debt either. You can use it to pay off car loans or other types of store credit that have high interest rates. You can also get debt consolidation loans, which is simply money lent to pay off the rest of your debts, but not put on a credit card. One thing to keep in mind that unless you have excellent credit, you will likely not be able to get an unsecured credit card or loan over $15,000. If you have more than that amount of debt then you may have to improve your credit score, or get rid of some of the debt before debt consolidation will work for you.

The use of credit in order to obtain assets has become a staple of modern day culture. Debts can pile up quickly, and interest rates can rise resulting in high monthly payments and a slow payoff period. Many people feel like they are drowning in debt, struggling to meet the monthly minimums and paying mostly interest on their purchases. Obtaining a low interest consolidation loan can quickly turn the situation around, making payments more affordable and interest requirements a fraction of their original costs.

A low interest debt consolidation loan is acquired through banking and financing facilities for the purpose of paying off numerous debts, and therefore combining them into one low monthly payment that is affordable to the consumer, and beneficial to the lender as well. In order to qualify for one of these loans, a person should have a good credit history and proof of his or her monthly bill requirements. The higher a person’s credit score, the better the interest rate will be on the new consolidation loan. Generally a good credit score is 680 or above, though various banking institutions may have looser or stricter credit requirements.

There are several types of low interest loans for debt consolidation, each with their benefits and faults. A regular loan from a bank is simple, with set terms and interest, often with no early payoff penalties. Interest rates generally hover around twelve percent, though this is the average and not the rule. A twelve percent loan may seem high, but for those with credit card interest rates in the 20 to 30 percent range, it is a welcome break. Often some form of collateral will be needed in order to secure the debt, and the terms of the loan can be stretched to a variety of lengths suitable to the loan holder.

Another type of secured consolidation loan is called a home equity loan or home equity line of credit. The benefits to these forms of debt consolidation are the incredibly low interest rates and often tax deductible interest. However, one should be careful in acquiring a home equity loan or line of credit, as a default can result in the acquirement or repossession of the home.

A financial planner can help one search through the options available to consolidate and provide recommendations for the best financial choices to make. A low interest debt consolidation loan can be a welcome blessing and lighten financial burdens when used correctly.