debt managementDebt consolidation and negotiation remains one of the better ways of debt management for individuals who are struggling to make payments or their lives have been reduced to a state of crisis as a result of their high debt. However many are asking whether consolidation is the right solution or if there is better ways of managing your debt situation?

To correctly address this question, you need to perform a debt analysis to determine what the amount of debt you owe, what is the monthly payment and interest rates on each debt. You then need to find out how much more you will pay on top of the borrowed money through out the life of your debt. You will be amazed to learn that in many cases you end up paying more than 150% or even 200% of the original borrowed funds.

Free debt analysis
There are some companies that will arrange a free debt analysis for your and it would be a great ideas to take advantage of this free service. Only after knowing all the facts about your debt, you can decide whether it is beneficial to use a debt consolidation service for lowering your payments.

What is debt consolidation
If you hire the services of a debt consolidation company then it is the hired firm that will obtain a loan for you to consolidate or bundle all your outstanding loans in to a single loan. Since you have now a single loan, you only need to make a single payment every month which reduces the amount of management overhead as you only need to track a single loan payment. Making this monthly payment will lower your overall debt as all your credit card bills, car loans and outstanding bills have been bundled into this loan. This can also help improve your credit score because the agencies see one debt instead of multiple credit card debts and various loans.

Debt negotiation
The most important points for reducing your payments are the interest rate and the loan amount. Most competent companies will negotiate with your creditors to reduce the total amount owed so as to reduce the over all loan amount. The second important fact is the interest rate on this loan. The interest on this single loan should be such that your monthly payment is substantially reduced compare to the total monthly payment before the consolidation. The reason this payment should be substantially lower is because many credit cards have very high interest rates, in some instance 20% or higher, thus bundling these into a single loan with a better interest rate should greatly reduce the payments.

DIY or hire professional service
To start, you need to determine how much money you can set aside each month for paying your debts and then you need to determine how much in total you actually owe to your creditors. If your total debt is below ten thousand dollars, then it is well advised that you take care of it on your own. You will find many sources on this site as well as on the Internet that will guide you about this process. Be sure to use any free debt analysis service you can find to help you along the way. If your debt happens to be more than $10,000 dollars, you need to combine debt consolidation with at least debt negotiation as well to reduce your total debt amount. Depending on your overall negotiation skill and your financial knowledge you may choose to either hire a professional service or search the Internet for DYI debt negotiation. As part of your negotiation, see if you can lower the payment as well as prolong the term. This combination will help to reduce your monthly payments. Once you run through all these, you need to calculate to see if the money you need pay monthly is within the budget determined above.

Learn your spending habits
If you track your spending every month, you will notice all your spending habits. Go through them and see if you are making any unnecessary payments or if there is some way you can cut back on some of those spending. In many cases we all have unnecessary spending habits that run up the bills every month. Wise planning and responsible spending can greatly assist in saving more money every month.

Is debt consolidation and negation a viable option
After this calculation see if the new budget can cover the monthly payment you need to pay to the creditors as determined in the previous paragraph. If the answer is yes, then debt consolidation is a viable solution. If not, you may need to consult a financial planner to seek other alternatives or file for bankruptcy.