Debt Solution Source

When you start looking for ways to reduce or eliminate your debt, you will find plenty of agencies and companies willing to help you. And most will charge you a fee for the service. There are times when you will need help with debt consolidation, but some of what needs to be done can be handled on your own. The answers to the following questions will help you determine if you should seek the help of a debt consolidation company.

1. How much debt do you have?
   Many people don’t realize they can approach their credit card companies to negotiate better terms themselves. If you owe less than $10,000 you may be able to set up new payment terms. If your debt is higher, you may need help from someone with more experience.
2. How will your credit score be affected?
   Of course one of the main reasons for managing debt is to maintain a good credit score. Using a debt consolidation program can actually have a negative impact on your credit report, so proceed only if absolutely necessary.
3. What are the fees for the service?
   When you are already struggling, adding another expense is the last thing you want to do. Some companies will offer counseling and money management training as an alternative to more expensive debt consolidation programs.
4. Have you made a concerted effort to tighten your budget?
   Sometimes just finding a few more ways to cut back your expenses is all you need to pull yourself out of your situation. Finding a few extra dollars and negotiating with your creditors yourself may make debt consolidation services unnecessary. Free financial counseling services may be available to you through governmental or charitable organizations. Even if you end up in debt consolidation, counseling services are a very good idea to help you avoid problems again in the future.
5. Have you exhausted all your other options?
   Perhaps a home equity loan can be your own way of consolidating bills to pay off higher interest rate debt. Or your bank may be willing to negotiate a better interest rate for you on an existing loan. Sometimes even a personal loan is an option.

No matter which solution you find to suit your needs, be sure you completely understand what is involved, and don’t use one that will end up putting further hardship on you. Try to handle your debt yourself, but seek help when it’s clear you need it.

Ranjit Dhaliwal on the impact of the current credit crunch on everyday Canadians.

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