The Best Reasons to Consolidate Debt
You may be wondering what the point of debt consolidation is when all is said and done and whether or not it is something that you should even be thinking about. When you want to reduce debt rapidly but don't want to wind up making the wrong move it is smart to be cautious and questioning of everything that is presented to you. Debt consolidation as a method of handling your financial situation will only work if you understand very well what it can and cannot do for you.
Consolidate Debt to Save Your Credit Score
Debt consolidation works best if you start it when your credit is still reasonably good and untouched. This means that your accounts which will qualify for debt consolidation must be relatively current (no more than three months past due) and cannot be in collections. The reason for this is that the option of bankruptcy exists for managing debt as well and it is usually reserved for those extreme circumstances where your credit has taken many hits from missed payments, delinquencies, collections or if you have secured debt. If you choose to reduce debt using consolidation, moving quickly before your situation deteriorates will significantly help save your credit score from tanking and may, as you near completing the program, actually give your credit score a boost.
Consolidate Debt to Pay off Manageable Debts
Again, not all debts can qualify for a debt consolidation program. Debts that are in collections or severely delinquent are very difficult to qualify for debt consolidation. Debts that are secured such as by a home or a car are also not usually candidates for consolidation because the lender for those types of debt are much more difficult to work with and are less likely to respond to any kind of negotiation. Also, your debt burden cannot be too large to qualify to reduce debt through consolidation. All companies will have their own limits but most require that you have somewhere in the neighborhood of $10,000 worth of unsecured debt and no more than double that amount in order to qualify for a debt consolidation program.
Consolidate Debt to Get Back on Track
A Debt consolidation program will require that you change your spending habits somewhat because if you consolidate credit card debt, you will probably be forced to stop using those cards as long as they are a part of the consolidation (the accounts may be closed for you). This type of action when you are working to reduce debt can lead to new attitudes and behaviors about debt and spending that will get you on a track to controlling your debt in the future or better yet, avoiding debt completely.