Is debt consolidation the right choice?

About debt consolidation

Debt consolidation services can help a consumer out of a tight spot, but they are not the right option for everyone.

For consumers who do not own a home, owe significantly more money than they earn, or who are unable to refrain from spending and accruing new debt, options such as contacting creditors directly and setting up payment plans, working with a certified credit counseling services, or even considering more drastic changes may be better options.

For consumers who own homes and are considering debt consolidation as a way out from under a debt, there are some things to think about. For one thing, consumers who own a home often can consolidate debt this way on their own – by getting a loan from the bank.

If bad credit or the amount of outstanding debt makes this unrealistic, then some consumers will work with agencies to help them consolidate debt.

Some questions to ask about debt consolidation:

• What fees or points will be charged, in addition to the interest on the consolidated loan?
• Is it best to work directly with the bank to consolidate loans?
• Is the service or professional licensed?
• Is the service forthcoming with information about itself?
• Have complaints have been filed with agencies like state banking regulators, the Federal Trade Commission, or better business bureaus?
• How have complaints been resolved?
• Does the service or professional spend time with the consumer and review the financial situation before making any recommendations?
• Does the service work with the consumers creditors to make sure they will accept payment this way?
• Does the service or professional offer advice about budgeting and debt management?
Does the service require payment up front?