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Debt Handling - Debt Consolidation: Pluses And Minuses

Many of us discover one day that we've accrued more debt than we're capable of paying back. That can be a real problem, and lead to a downward spiral of extra charges, penalty fees, and additional costs that make it even harder to pay things off.

One of the most common suggestions for getting out of this trap is using a debt consolidation service. For thousands of people, this has been a way to get things under control.

However, it's important to understand that there are pluses and minuses to this, just like any other service. You need to learn about them if you're going to decide whether or not debt consolidation is going to work for you.

Step one is understanding what debt consolidation really is. At it's most basic, it's just a simple thing. You gather all sources of debt into one, so you make just one payment to just one agency.

However, for that to help, you're going to need to do several things at once. After all, one bill of a hundred dollars, one of twenty-five and one of fifty paid to three creditors is the same amount as two hundred twenty five dollars paid to just one. If you use online payment, you don't even have to send out three checks, so paying is relatively easy.

To allow debt consolidation to help you, the total monthly payment has to go down, the net interest must be reduced, or the amount you own in total must decrease. Whether these things happen depends on which kind of consolidation you're using and who you're working with.

If you're lucky, which doesn't happen much, all three occur. Most commonly, the monthly payment goes down, however. This makes things a lot easier, since you'll be more able to pay on a regular basis.

That keeps you from heaping up more interest and more late charges, in addition to what you already owe. You can take the time to relax, since you'll be able to easily meet your obligations without making too many sacrifices.

Of course, if your monthly payment goes too low, you could end up inadvertantly getting into more debt. If you feel like you've got a lot of money to spare, you might start acting like you don't owe a thing. While it's not healthy to worry all the time, it's a good idea to stay concerned and committed to getting rid of your debt.

Unfortunately, the majority of consolidation plans lower the payment by extending the life of the loan, which means you'll pay more interest in the long run. This is fair, since you owe the money.

However, some lenders will settle for less if they believe they're more likely to actually be repaid that way. Try negotiating a lower settlement, then make the agreed payments on a consistent monthly basis.

Losing debt is a lot like losing weight. It's a difficult process that requires a lot of commitment and some big changes in your life, especially if you want it to stay away.