Debt Consolidation and Debt Management: Three Options

It's time to do something about your credit card debt, but it can seem like too much to deal with all at once. Debt consolidation provides a first step in debt management, and can help you reduce expenses and streamline monthly payments. If you're organized and have some financial savvy, you can probably manage or consolidate debt on your own; otherwise, help is available.

DIY Debt Consolidation / Debt Management

Your first step is determining how much you owe, and to whom. Make a list of your creditors, how much you owe, and the minimum monthly payment, payment due dates and the APR. The annual percentage rate, or APR, is shown on each of your statements. This is the annual amount of finance charges assessed on each account expressed as a percentage rate. The APR includes all finance charges associated with an account including interest rate, membership fees, overlimit fees, and late fees. The next step is ordering your credit reports and scores here. Credit scores must be purchased and cost about $15 to $20 each. Watch out for offers of free credit scores that require high membership fees. Make note of your credit scores and review your credit reports carefully for verifying accuracy. Now it's time to decide which debt consolidation or debt management method you'll use.

• Credit Card Balance Transfers: If you have plenty of credit available on a low APR card, this may be the way to go. You can transfer several balances to the low APR card, and pay off one balance instead of several. This can work if you can avoid using your credit cards. Also, balance transfer rates can take a bite out of potential savings. Read the fine print carefully, as many card issuers have recently raised balance transfer fees.
• DIY Debt Management: There are two popular approaches to paying off debt. You use the "avalanche method," which starts with paying off your highest APR debt first, then adding the monthly payment for the highest APR debt to the amount paid for the next debt, and so on, until your debt are paid off. You'll make minimum payments on all debts except the highest APR debt. This method gains momentum as debts are repaid. You may prefer to address small debts first; this calls for using the "psychological" method of debt management. Gain the satisfaction of paying off small balances first, and then use the avalanche method for paying off larger balances.
• Getting Debt Help: If you're not ready for DIY debt management, you can seek help from a certified credit counseling service. You'll make one monthly payment to the credit counseling agency, and they distribute payments to your creditors. Credit counselors can often obtain reduced finance charges and waivers of fees as part of your debt management plan.

Don't procrastinate, as it only costs more. Start your debt consolidation or debt management plan today.

About the Author:
Karen Lawson started writing stories about birds and surfing at an early age. For more than ten years, she enjoyed a productive corporate career in mortgage banking before moving to Reno, Nevada in 1997. Karen earned BA and MA degrees in English (specializing in writing) at the University of Nevada. Significant areas of research and writing include truth and ethics in creative nonfiction, medical humanities, and the symbolism and lore of birds in American literature and culture. Karen has taught English at a community college, is writing a collection of poetry, and enjoys birdwatching and walking her basset hounds.