Bankruptcy vs debt consolidation, which one is right for your current debt problems?

Debt consolidation isn’t a magic fix-all for getting out from under a pile of loans and credit card debt. As a matter of fact, used by itself, a debt consolidation loan can end up getting you into much more trouble than you were in before you entered into the program. Companies that offer this service do it to make money. It’s that simple. That’s one of the key facts you should keep in mind when negotiating on the terms of your consolidation loan. They’re not doing you a favor, they’re making money off you.

So what are the considerations that you should keep in mind? The first is to answer the question of how you got int the mess in the first place. You’re obviously living beyond your means, so that’s a good place to start.

You should be ready to cut up all your credit cards, because they’re likely one of the main reasons you got into debt over your head. You can’t continue to spend more money than you make, and credit cards are the enabler that allow you to do this. Remove them from the equation and you’ll be well ahead of the game.

Another question you need to ask is are you able to cut down your spending? The fact that you have to do so or you’re going to end up on the streets is all well and good, but some people are addicted to spending money and couldn’t stop if they had their arm twisted behind their back. Think about it. If you get a big loan that pays off all your other loans, and in six months you have a bunch more debt that you can’t pay off, you’re in big trouble. And you won’t be able to get another debt consolidation loan to cover the additional debt.

As a matter of fact, I’ll go as far as to say that if you’re not ready to commit to living on a budget that falls within your means, giving up whatever it is you have to to get that done, you shouldn’t even look into a debt consolidation loan. That means you may have to cancel cable and satellite, high speed internet, sell your car and drive a beater, and maybe even put your house on the market and move into an apartment until you get on your feet. These are all serious questions that you need to have answers to before you sign up for more problems.

About the Author:

Allen provides debit consolidation information at his blog on debit consolidation loans.

Christina Costa | Debt Consolidation, Debt Management |

Tags: Debt Consolidation, Debt Management

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