Debt consolidation is another debt management option to consider when you owe a large amount of money to creditors. Debt consolidation involves using new debt to pay off existing debt that’s owed to creditors. When done correctly, debt consolidation can help you get out of debt faster by paying less interest on debts and correctly managing your finances.
The following criteria need to apply, if debt consolidation is the right option for you:
- Interest rates on the new debt must be lower than the rates on the debts you consolidate
- Total amount of money needed to be paid on debts must be lowered each month
- Don’t trade fixed-rate debt for variable-rate debt. The risk associated with a variable rate is that the rate could start out low, but may move up
- Pay off new debt as quickly as possible. Ideally, apply all the money you save by consolidating to paying off the new debt.
- Commit to not taking on any additional debt until the debt you consolidated is paid off. It is very important to manage your money properly, to avoid landing up in further debt.
DebtBusters offer a range of debt solutions and are designed to meet the individual’s specific needs. For more information on debt consolidation, go to DebtBusters debt solution page.