Bad Debt The Global Issue

By: Helen Stevens
Most of us have heard varying accounts of debt consolidation, while some promote consolidation as a simple and effective means of debt relief, others give terrifying accounts of increased debt and ultimate financial disaster. The truth is somewhere between these extremes, depending on the situation, and debt consolidation could potentially be effective at lowering your debt. However, the value of debt consolidation programs can vary based on many factors, such as the amount you owe, your earnings and the types of debt you have. "How successful your debt consolidation program is" depends on your debt perception, your general thoughts about money. You need to keep the dos and don'ts in mind when considering consolidation.

If you're thinking about a debt consolidation loan, make sure you consult with a professional knowledgeable about a wide variety of options, rather than someone who just wants to sell their product. A change in your attitude toward debt or a combination of better budget control and professional advice may be necessary instead of a debt relief product in your search for a way to dig you way out of debt. You need to think about the repayment terms before choosing a debt consolidation loan. In general, paying the lowest monthly payments with longer repayment period means more to be paid in the long run, since more interest will be accrued as repayment period lengthened. If you only lower your payments without bothering to change your spending habits, your debt will continue to grow.

Would you be better off with a debt consolidation loan or a debt consolidation mortgage? In spite of the fact that you may receive a smaller Annual Percentage Rate if you went with a mortgage, ending your debt quicker, but risking your home.

If payments on your debt are becoming too much, it's time to do something different, a debt adviser will be able to help you in making certain decisions. Do you need to get out of the red? A debt advisor can help you choose the right one if necessary and not the same thing works for everyone, each person is different and each person's debt situation is different.

It is imperative that if you have consolidated your debts with a consolidation loan, you stop charging to credit cards, store cards or overdraft accounts. If you have a consolidation loan to pay off older debts, it can be very tempting to make new charges to these accounts, adding to the already serious situation. Since the last thing you need is new debt tacked onto the old ones, keeping one credit card for emergencies can be a good practice -- but only if you're aware of how you got into trouble in the first place! What behaviours in the past were responsible for the debt you now have? Since to goal of debt consolidation is to enable you to pay off your old debt without encumbering yourself with new ones, it's important to make sure you understand how you got in trouble in the first place, and how to avoid it in the future.

Helen is a freelance journalist writing about bad debt at eComparison.