When you are in debt and you have a number of creditors who you owe money to, it can be tempting to bury your head in the sand, not answer the phone or the door and hope it all goes away. Of course, it won’t. The situation will just get worse as the interest and charges for non-payment build up and your debts become even more unmanageable.
The first hurdle to cross in this situation is to accept and acknowledge that you have a debt problem. Sometimes the best thing is to share this information with someone else – your partner, a relative or friend. Talking about the debt openly will help take some of the pressure off and hopefully galvanise you into action – devising a plan to start paying the debt off.
It may be that you have heard of different debt options like debt consolidation and are wondering whether it’s right for you. You might find it useful to talk to a debt management company which can explain what is debt consolidation so that you can decide if you need it or not.
Debt consolidation is basically a way of putting all your debts into one basket and paying it off in one monthly payment at a lower interest rate rather than several different ones, each with higher interest rates.
The usual way of consolidating debts is to take out a larger loan than all your existing debts and paying off those debts at a stroke. The debt consolidation loan usually has a lower rate of interest than all the individual debts you already have. On the downside the debt consolidation loan will often run for a longer period and there’s also the temptation to start spending again as the stress of having several creditors chasing you has been removed.
Unfortunately, many people who take out a debt consolidation loan fall into this false sense of security and start spending again before they have cleared the debt consolidation loan. Pretty soon, they’re back where they started.
So, debt consolidation can be a useful tool, but only if you use it wisely. It’s best to get some objective financial advice on your personal circumstances before you go ahead and sign any agreements.