How Will Debt Consolidation Affect My Credit And My Overall Level Of Debt?

The use of debt consolidation is essential if you are wanting to avoid paying huge amounts of interest that will subsequently cause a great deal of anxiety when the day arrives that you are unable to make payments.

Debt consolidation can be used as a solution to excessive credit card debt as well as other types of personal debt such as loans and offer relief to individuals. There are few worse feelings than being overwhelmed by debt as it overspills to affect every aspect of your life and decision making.

Debt consolidation organizations will always inform people that they should at least pay the minimum requirement on their debt, but by doing so it could take forever to repay your debts as the vast majority of those payments will only cover the accrued interest. However, although this is true the argument is that making an effort to continue repaying your debt reflects better on you showing that you at least have the willingness to repay your debt.

It is debatable that the use of debt consolidation companies to manage your debt can have a negative affect on your credit score in comparison to negotiating better terms with your creditors yourself. It is argued that by using a third party to deal with your creditors that you are admitting that you are unable to manage your finances well enough.

Most, if not all, debt consolidation services or debt management services will claim to be able to offer simple methods to reduce the size of your bills, combining them all into one much more manageable and affordable monthly installment.

However, there are companies that have excessive hidden fees that are coupled with high interest rates and by using these companies you could end up no better than if you were making the minimum payments each month.

So, what are the benefits in using these companies, if any?

Not all debt management companies are unscrupulous and with some good research you will be able to locate companies that can actually help you and reduce your debt substantially.

It must be mentioned though, that applying for a debt consolidation loan and negotiating with your creditors for a reduced settlement yourself is a far more beneficial way to go about controlling your debt; and if you are switched on enough to do this before you miss any payments it will actually improve your credit score rather than lower it!

In conclusion, debt consolidation is the best way to get your finances back on track, and a consolidation loan organized by yourself is the preferred option rather than debt management companies for improving your credit score.
For more information about credit card consolidation and other debt consolidation information, visit

(Author: Daniel Major – Published: September 2009)