If you have been feeling overwhelmed with your credit card debt and other mounting bills that arrive each day, you may feel like there is no light at the end of the tunnel. Bankruptcy is something that you want to avoid because you can stand to lose a lot—including many of your assets as well as your long-term buying power.

1. If you have been feeling overwhelmed with your credit card debt and other mounting bills that arrive
each day, you may feel like there is no light at the end of the tunnel. Bankruptcy is something that you
want to avoid because you can stand to lose a lot—including many of your assets as well as your long-
term buying power.
Debt consolidation is a good choice
when it comes to successful debt
management, but you need to be wary
of scams and companies who are more
willing to charge high interest and fees
that can actually accumulate onto your
debt load. Choosing the right debt
consolidation plan means meeting with
a reputable financial planner who
specializes in debt consolidation. They
will be able to closely examine your entire financial lifestyle and come up with a concrete plan to help
you start chiseling away at your debt rock. Here are a few things to consider when choosing the right
plan.
Salvaging your credit
One of the biggest things you need to ask yourself is if consolidating your debt will save your credit.
Right now if you have a high debt-to-income ratio, your credit score will suffer tremendously. This may
not go away right away unless you are willing to pay
off all high interest cards and the bulk of your debt
quickly. As you begin to pay off high balances and
multiple cards with smaller balances, you will see
your credit score go up. With a debt consolidation
loan, most of your revolving accounts and credit
cards will be paid off and then moved to one larger
loan package. This doesn’t mean that the debt has
been eliminated and you shouldn’t accumulate more
debt during this time. There may be a period of time
where your credit score will go up, as your credit
cards are reporting zero balances with the same credit limits. This can be enticing to borrow more

2. money because you may be offered zero or virtually no interest rate loans as a draw-in for new lines of
credit. This can lead to a spiral effect of debt lockdown and really damage your credit. Once you
consolidate—focus on paying that debt off immediately. Double up payments if you can and work on
paying off the balance as quickly as possible.
Lower interest rate
In order for a debt consolidation program to really work to
your benefit, you need to obtain a low interest rate. Credit
card rates are across the board—they vary between 6 and
30 percent with all types of fees and penalties weaved into
their terms of service. If you can get a loan with a
reasonable interest rate to combine all of your balances,
you will see a long-term cost savings. The goal again is to
keep your payment affordable, reduce overall debt and
strive to pay the entire balance off in a timely manner. If
you sit down to crunch numbers, you may realize that your
new consolidation loan payment is the same if not a little
more than paying all of the minimal payments on your old
cards. This may seem like you are not getting ahead or are
wasting your time with consolidation. Looking at the fine print, this isn’t true. Consolidation loans are
just that—consolidated or bulked into one payment over a shorter period of time.
Length of loan
This is where the true test of savings comes in. The overall length of your new loan is likely shorter and
has a fixed-term compared to credit card or revolving accounts which may take decades to pay off. You
will have an end date to your loan package and you will know exactly when the entire balance will be
paid in full. Some consolidation loans
offer a variety of loan payment plans
to help meet your financial needs. If
you can opt for a bi-monthly or bi-
weekly plan, you will see a significant
dent in the balance of your loan and
you can pay it off a lot quicker than if
you were to make monthly payment

3. plans. In some cases even if you have a monthly payment plan in place, you can still pay bi-weekly or pay
more down on your principle balance with each payment.
Debt consolidation is a viable alternative to bankruptcy. With some bankruptcy programs, the courts
may require you to consolidate your debt—especially if you are in a repayment plan. Consolidating your
debt may also help you avoid bankruptcy and allow you to keep your home, RV, vehicle and other assets
that would be at risk of repossession should you proceed with bankruptcy proceedings. A qualified debt
specialist or financial planner will be able to analyze your existing debt load and credit history to see if
you qualify. Saving money and peace of mind will help you regain your financial freedom and credit
power.
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