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September 15th, 2009:

The Importance of Bad Debt Consolidation

Most people would rather ignore debt than attempt to get rid of it. Unfortunately, it is precisely this mindset that probably creates the debt in the first place – an unwillingness to grapple with reality, to look at all options available, and to take a reasonable, corrective course of action.

If you’ve already built up giant piles of debt, but have no reasonable means of paying them off in the periods specified by your creditors – if you’re already beginning to ignore and default on payments – then it is time to do something about this problem. If you don’t your credit will slowly shrivel away – and for no real reason at all – then you need to consider using some form of bad debt consolidation.

Now, what’s important to note is that you have several, not one, means of obtaining a bad debt consolidation. A good place to start, however, is to take a general survey of your debt to determine the amount you owe, the amount you’re delinquent on (should have paid), and what your interest rates and payment schedules are for all of your sources of debt.

If you’re not delinquent on any payments yet, but things are spiraling out of control, that’s actually good news. You more than likely have good credit now. This means that you can use credit card consolidation as a means of bad debt consolidation. You should start by finding and applying for several 0% APR trial-period cards. Once you receive these cards, you will want to use the transfer balance option to move debt from your current cards to these 0% APR cards. This will allow you to simply make the minimum payment each month for the entire year without accumulating bad credit or interest. In fact, your credit will actually improve by making minimum payments.

Now, this takes care of your unsecured debt – or debt not backed by securities, such as a home – but for your secured debt, you wont be able to use a credit card. Instead, you’ll have to take out a bad debt consolidation loan. If your credit is still reasonably good, this wont be too hard. If you’ve already defaulted on several payments, you will want to contact a debt consolidation company and talk to a debt counselor for free. He/she will take account of all of your current debts and then help you find a best course of action. In many cases, the debt consolidation company will even bargain with your creditors on your behalf, getting as much debt canceled as possible.

One thing you will want to consider carefully when entering into a bad debt consolidation contract is what your monthly payments will be and what your interest rate is. If you were already struggling with payments, it is probably a good idea to go with the lowest payment plan available (i.e. the longest contract) and the lowest interest rate possible by putting up securities as collateral.

If you follow the steps outlined above, you should have no problem consolidation your debt and starting down the path to a debt free life – or at least a considerably less stressful one.

Seven Steps to Changing How you Think About Debt (so you Can Get Out of Debt Quicker)

If you’re facing a huge debt, you have probably realized that it is not going to go away on its own. Even if you suddenly came into a lot of money, debt would likely return. That’s becasue debt is more of a symptom of how you think (and feel) about debt than a mere financial problem. You have to learn to think about debt in new ways.

First, start by admitting that you are in debt. Believe it or not, this a stumbling block to many people who prefer to live in denial (it’s cheaper) than debt. But denial will eventually crack under your feet and plunge you into the icy waters of reality. Size up your debt.

How do you do that? Take a pencil and paper and start to write down all of your debt. You may have to call the toll-free numbers on your various credit cards and look up phone numbers on varies statements. Write down all of your debts and add them together.

Don’t look away, even if the number is scary. You need to know the truth. Sometimes that number has to be pretty frightening in order to engage our full attention!

Second, you have to “own” your debt. A lot of people act like their debt belongs to someone else. And maybe it did, in a way! Some people come into overwhelming debt because they wound up with the debts of a spouse (or ex-spouse). Some people end up paying off the debts of family members. Others got into debt when a house burned down or the family suffered a medical problem. You might get into debt over posting bond for a loved one.

No matter how you wound up with the debt, you have to recognize it as your own. You must assume the responsibility for it.

There are lots of reasons that people get into debt. Even if you just overspent your way into debt, you probably had a lot of good reasons for what you did. Maybe you had a lot of debt left over from your college days. Maybe you were under a lot of emotional stress and found “retail therapy” helped. Perhaps you did not understand how money works. I know one person who got herself into debt because she used a lot of plastic while in the “manic” phase of an undiagnosed manic-depressive condition.

You may have reasons, and that’s not the point. The point is: the debts are yours. Take responsibility for them.

You won’t ever get out of debt till you admit that you (not anybody else) have debt.

Third, you need to forgive your creditors. That sounds very weird, but have you ever noticed that in the Bible, it talks a lot about “sin” and “debt” being related? The Lord’s prayer, for instance, in some Bible translations talks about asking God to “forgive us our debts as we forgive our debtors.” In financial terms, overlooking a debt means to “forgive” it.

You probably got into financial trouble because of some other trouble. Whether it was a failed marriage, a natural disaster, disease, devastation, mental illness, or just plain getting through a “rough patch,” you probably need to go back and forgive the other people involved.

Let’s say you’re heavily in debt because you owe child support. And let’s say that there is a lot of pain still attached to the relationship that brought that child into the world. Maybe you even feel tricked or cheated into paying the child support. And it could be genuinely unfair.

Forgive everybody involved. Forgive the other parent of your child, forgive your child, forgive the family of the other parent, forgive the state, and forgive the judge who made the ruling.

Forgiveness does not mean that you agree that what they did was right. Forgiveness does not mean you like what was done or that you approve of what was done. Forgiveness means you accept it and you refuse to carry around that wasteful anger and animosity any more.

What happened may or may not have been fair, but that’s not the point. It’s happened and you are ready to get past it. That’s forgiveness.

Fourth, you need to make a conscious choice to get out of debt. A lot of people are digging themselves deeper and deeper into debt not because they want to, they just have not decided to stop digging! Make a decision.

Getting of debt involves one big decision (that’s the easy part) and hundreds of smaller, daily decisions (that’s the tough part). If you need to, find a way to remind yourself of getting debt free. Maybe you can write it on a paper and stick it on your desk, in the car, or on your bathroom mirror. You can make up a mantra for yourself and just say, “I’m going to get out of debt” whenever you need to and even some times when you don’t need to. Don’t buy anything new, but if you have a ring or bracelet or something special, you can wear that and use it to remind yourself that it is the symbol of your decision to get over your debt.

Fifth, stop the bleeding. Most debt is a result of a lot of small wounds. Stop as many as you can. This means you have to look for them. A few debt areas will be obvious. Do what you can to stop digging yourself into debt. But search out other ways that money is slipping through your fingers.

Don’t be afraid to be zealous. Zealous, passionate people are the ones who can beat debt. Cancel your gym membership, cook at home instead of going to restaurants (even fast food joints), quit cable TV, and buy your clothes at garage sales. Many of us get riled up at some of those prospects, but they are all viable strategies. They work. I’m not saying you have to do all of them or any of them but you need to stop as much hemorrhaging as possible.

Sixth, get a plan. It does not seem to be as important to use a specific plan as it is to use any plan. You need a system. One good one is to line up your debts and start paying them off. Pick your highest interest debt first and devote every spare cent to paying it off. Then proceed from there.

You can also try debt consolidation where you roll a lot of higher-interest debt together into one larger debt at more favorable terms.

Certified credit counselors are available locally (check out or online. There are valuable books and courses on money management. Figure it out, get help, or work with somebody. But you need a game plan.

Seventh, keep on. Getting out of debt is a bit like losing weight: it takes hard work, dedication, and just dogged day-after-day persistence.

If you or a loved one are facing overwhelming debt, get information on debt consolidation at .
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Do You Believe Any of These Top 10 Myths About Debt Consolidation?

Most people facing growing debt and limited resources have probably looked around for financial solutions and heard a little bit about debt consolidation. Debt consolidation is a great financial option to overcome overwhelming debt, but it is not right for everyone. But before you can figure out if it is right for you, you have to realize that some of what you may have thought about debt consolidation … is wrong.

Of all the financial plans available for people dealing with overwhelming debt, debt consolidation is probably the most valuable and the least understood. In fact, you may already believe some of these common myths about debt consolidation. Find out the truth!

Myth #1 Debt consolidation is the same or similar to debt management, debt settlement, and bankruptcy.

Truth Debt consolidation is nothing like those other programs. In truth, it is not so much a “program” (you can even do it on your own, if you know enough) but more of a strategic approach.

In debt consolidation, you lump all of your debts together and repackage them. Debt settlement and debt management typically involve dealing with a company or counselor and the object is to reduce the amount you owe. Bankruptcy is a legal proceeding that involves a date with a judge.

Myth #2 Debt consolidation reduces your debt.

Truth No, it doesn’t. If you owe a total of $80,000 on several credit cards and loans and you consolidate that debt, you still owe $80,000.

Debt consolidation does not re-negotiate, settle, write off, or reduce any of your debt. What possible advantage is re-organizing your debt like that?

If you have a lot of loans at high interest rates, repackaging those higher-interest debts into one larger loan at a lower rate reduces your interest and the amount you have to pay. This means you can either pay less a month or (even better) pay the same amount but get the debt paid off sooner.

Myth #3 Debt consolidation will hurt my credit score.

Truth Done properly, debt consolidation will not impact your credit score or credit report negatively. In fact, debt consolidation may even improve your credit score! That’s because you’ll be paying off a bunch of smaller loans and any time a loan is paid in full, that helps your credit score.

Myth #4 Debt consolidation requires getting help from an outside agency or a lawyer.

Truth While there are companies that specialize in debt consolidation programs, you do not have to use them to consolidate your debt.

Of course, if you want to consolidate your debt on your own, you have to know a bit about how to do it and what the options are. But it can definitely be a do-it-yourself project for people good with money (or who are willing to learn enough to get good with money).

Debt consolidation is also not necessarily visible to outsiders. Your bank, the credit bureau, and other parties may not even be aware that you have consolidated debt.

Myth #5 Debt consolidation is something for financial losers and lightweights, not for people who know how to manage money.

Truth This is the most far-out myth about debt consolidation. Debt consolidation is a principle that is used in business and by the super-wealthy all of the time. It is a way of organizing and structuring your debts in a way that is most advantageous to you.

Myth #6 Debt consolidation is just robbing Peter to pay Paul; you’re just getting more debt!

Truth Debt consolidation is indeed a way for you to pay off one debt by getting another debt. But not all debts are equal.

As an example, let’s say that you owe $10,000 and the loan is set up so that you have to pay 22% interest. For example, let’s suppose that I go to my credit union and work out a deal to borrow $10,000 at 12% interest. While both debts are still in the amount of $10,000, the debt at 12% interest is a better deal for me. I won’t have to pay as much per month or, if I make the biggest payments I can, I can pay it off sooner.

Myth #7 Debt consolidation requires you to be a homeowner.

Truth There is a grain of truth to this, in that owning a home definitely offers an advantage to anyone who wants to consolidate debt. (It doesn’t matter if your home is paid for or not, but you do need some home equity.) However, you can consolidate debt without owning a home, too.

Myth #8 Debt consolidation will make it harder for me to get future loans.

Truth In most cases, it is unlikely that anyone but a forensic accountant could figure out that you consolidated your debt (unless you go through a debt consolidation companythat might leave a paper trail).

If you borrow money in one loan and then take out another, more advantageous loan to pay off the first one, you’re more likely to leave a paper trail of somebody who pays off debt responsibly. It is more likely to make you a desirable creditor.

Myth #9 People who consolidate debt just wind up digging themselves in deeper in debt!

Truth It is absolutely possible to consolidate your debt and then keep spending and get yourself in a big mess. That’s why you need good information and a plan to pay off your existing debt, manage your finances now, and start planning for your financial future.

There is no reason that debt consolidation cannot work to get you out of debt for good, but you have to have a plan.

Myth #10 Debt consolidation will allow me to write off some of my debts and it will stop bill collectors from calling.

Truth Let’s take these one at a time.

Unlike bankruptcy, debt consolidation will not allow you to write off any of your debtnot a penny of it. Whatever you owed as a debt before debt consolidation is the amount you’ll owe after debt consolidation.

The advantage is just that you structure it in a more favorable loan. You do not get existing debts cancelled or decreased! Now it’s true you can work that out in other debt management solutions (debt settlement lets you reduce debt, bankruptcy will let you write some debt off) but they come at a very high price. Both of these approaches will have a negative impact on your credit score, will make it hard for you to get future loans, and stay on your record for quite a while. Bankruptcy, in particular, is an extreme solution that involves an actual court proceeding and a judge who has the authority to make certain decisions about your financial situation (including forcing you to sell some items to pay off debts).

Debt consolidation can only stop bill collectors indirectly. Here’s how: let’s say you have six debts and you’re getting calls all of the time. If you consolidate your six debts into one large debt consolidation loan at more favorable terms, you’ll pay off all of those debts. Bye-bye, bill collectors!

However, if you don’t pay off your new debt consolidaiton loan on time, the bill collectors will start calling again.

For thorough and objective information about debt consolidation options, click on .
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