3 steps in a good debt consolidation plan

Debt consolidation companies offer a variety of services to get you out of debt as efficiently as possible. However, ever wonder what a good debt consolidation plan should offer you? Here are the fundamentals. A good debt consolidation plan involves 3 basic features: a debt assessment, debt reduction through a debt management strategy designed to fit your lifestyle, and debt education.

Debt assessment

Most debt consolidation companies offer a free assessment, consultation or debt analysis. A debt assessment means that you, together with a debt management expert, examine your debt situation. When you meet with a debt consolidation professional, you should have a detailed list of all the debt you owe, your income and the payments you have been making up until this point. A debt counselor will evaluate your debt on this basis and determine the best debt consolidation plan to fit your needs.

For example, your debt assessment might uncover the fact that you are not managing the money you have very effectively. As such, you aren’t paying down debts, even though you could be. If this is the case, a debt counselor wouldn’t recommend a debt consolidation loan, as it would be unnecessary in your situation. Through the development of a budget and the rescheduling of your payments, a debt counselor may be able to solve your debt problems without any drastic measures.

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Debt reduction

The key to any debt consolidation plan is to reduce your debt load. The main reason people consult debt consolidators is because they want to get out of debt as quickly as possible, and find themselves unable to manage their debt alone. Debt reduction strategies come in a variety of ways. Your debt assessment will have uncovered the main problems in your finances.

For example, you may owe $20,000 in unsecured credit card debt. The high interest rate is killing you, making it possible to only pay the minimum on your outstanding balance each month. In this type of situation, a debt consolidation plan would almost certainly involve a debt consolidation loan or debt negotiation. If you are a homeowner, you have some collateral to offer against a loan, thus making your unsecured debt secured. This is one option in a debt consolidation plan.

However, depending on your ability to repay the loan by making each monthly payment on time, this might not be a good option for you. A debt consolidation specialist will be able to advise you of your best options without having your risk your home.

Debt education

Let’s say a debt assessment uncovered $10,000 in unsecured debts due to overspending and living beyond your means. In the next step of your debt consolidation plan, a debt counselor recommended that you take out a debt consolidation loan in order to repay your debt. Unfortunately, the first 2 steps aren’t sufficient in dealing with your debt in full. Unless you become educated in better financial management, you are at risk to find yourself in debt again.

A good debt consolidation plan should offer you advice, workshops and publications that assist you in learning to manage your own debt. After all, once you are out of debt, you do not want to find yourself back there .

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How Do We Compare?
Read about how Debt Consolidation Counselors is different than most credit counseling and debt settlement agencies out there.

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