Is debt consolidation plan a good idea? With the way the economy is today, chances are you are looking for a way to get out of debt. Thankfully there is one solution out there that can help you get your debt under control: debt consolidation plans or programs. But how do you know if these types of debt relief plans really work?
It can help to look at the pros and cons of debt consolidation so you can make an educated decision whether this is the right thing for you to do with your situation. Keep in mind, however, that just because this type of plan worked well for your friend, it may not be the right thing for your financial situation.
Pros – Good Reasons to Consolidate Debt
Most people do not realize the amount of money that they dish out each month in finance charges with certain debts like credit cards and loans. When you consolidate these debts, you will be able to stop the finance charges or in some cases eliminate them all together.
You can also help to improve your credit score when you use a debt consolidation program as many of these programs pay off your debts which looks better for your credit history. Another great plus is that you end up with one small payment per month versus many payments per month which you can add.
Cons – Reasons Not to Consolidate Debt
If your debt is not linked to such things as credit card payments or loans then you may not be able to consolidate them. There are certain bills that you can lump together to help make your monthly payments going out, easier on you.
But if you owe back rent or you are behind on utility bills then you will not be able to work these bills into a consolidation program. You will have to go directly to each creditor to work things out.
Some debt consolidation programs will have you turn over your monthly income and they will pay your bills for you and then give you a spending allowance to work with each month. Many people do not like to do this as it can be hard to budget money this way and plan for the unexpected.
Debt Consolidation Plan Options
The key here is to learn about different programs for debt consolidation to see which one will meet your needs without compromising your money. You can make the program work for you if you know what you need.
So be sure that you are well-educated on your choices before you make your final decision. A debt consolidation plan may not be for everyone but if you have a great deal of debt using up your money then you may want to see what your options are.