Hiring a Debt Consolidation Firm, Is It A Good Deal?

Do you feel like you’re stuck in an inflatable raft surging down the Grand Canyon of debt? Is your raft springing more leaks than you can plug with your ten fingers? Every month are you robbing one credit card to pay another? Have you taken out a second mortgage to pay for holiday gifts? Then maybe debt consolidation is for you, or is it?

Before you jump overboard and grab one of those tempting pieces of junk mail that promise to “cut your monthly payments in half”, there are a few things you should consider.

1. In this millennium, low-interest balance transfer credit cards are everywhere. Beware of cards that have rates that only last a few months and then swoop down with high interest rates. Another downside to switching cards every few months is that eventually the activity will show up on your credit report and mark you as a bad risk. If you are floating Peter to pay Pauline, make sure that you call the card companies and have them mark the account “closed at the customer’s request.”

2. Beware of Debt Consolidators who promise to take care of all your debt by putting all your bills in one tidy little bundle. Many Debt Consolidators are “friendly” with creditors and some times receive as much as a 15% rebate from creditors for consolidating your bills, which they in turn are charging you. Is it worth paying someone else a fee to negotiate a lower interest rate? Can you not call up your creditor and make your own arrangements? Most creditors are willing to work with you by reducing the interest or lowering your payments.

So, what are you going to do? What are your options? Here are a few suggestions for getting out of debt and staying out of debt:

1. Throw away the credit cards! Or at least keep the cards at home is a locked drawer. If you don’t have the plastic on you, you will have to think twice about the purchase. Maybe by the time you run home to get the card, common sense will have prevailed regarding the purchase your were so adamant about making an hour ago.

2. Write down everything you spend money on. Know what your expenses are including what you spend on birthday gifts, socks, banking fees, insurance (car, house, kids, life, disability), subscriptions, Ti Kwan Do classes, snacks at Burger King, (you get the picture!) Keep a daily journal of everything you buy.

3. Brown bag it for lunch, car pool, buy store brands, get rid of cable,

4. Bottom line, make a budget, stick to it, live within your means!