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Look At Effects Of Debt On Finance And Options Other Than Debt Consolidation

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When you find yourself swimming in the deep end of debt pool then you will come across several people and even several debt advisors who will suggest you to consolidate your debts. Well, to some extent they are true.

Even when you surf through the internet looking for different websites that tells a lot about how you can get rid of debts, they will say that debt consolidation is the best possible way. Whether it is for their sales and marketing objective or any other reasons, these sites will also publish several debt consolidation reviews to substantiate their claims. Well, they too are true but once again to some extent.

However, to be very honest, debt consolidation is not the only way in which you can get rid of your debts. There are several other useful and equally effective options available and all of these have its characteristic pros and cons. Read on to know what your best options are.

Brief insight about debt

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However, before you move forward with any of the available options, it is important that you understand that debt is something that you cannot get rid of until and unless you change your behavior and your outlook in managing your finance and spending your hard earned money. In such situations, you will surely end up in even worse shape.

As studies reveal, most of the Americans find them swimming in revolving debt which is typically summarized as credit card debts. This amount is assessed to be over $1 trillion dollars, meaning a one followed by twelve zeros! Huge, isn’t it?

Therefore, if you find yourself struggling with your debt to get rid of it, it is clear that you are not alone. There are several others like you who have maxed out their existing credit cards, taken on new ones and maxed out as well and eventually found them deep down in the debt hole, doubling and even tripling their debt that crippled their financial health and status.

When you pay the minimum on your credit cards each month, it means you are paying only the interest and not the balance. The debt will never be paid off thereby affecting your credit score. You are terrified to check your credit score and remain in the vicious cycle.

Looking at the options

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Now, take a look at the different options available.

To start with, make sure that you negotiate with your card companies. Believe it or not, the credit card companies know very well what they are doing. It is not without any reason or simply due the goodness of their heart that they raise your limits while offering new credit cards to you. They do so because they want you to use them and get paid the interest.

Well, there is no magic solution to get out of credit card debt and even sometimes paying them down on your own may not work. In such a situation have the courage to meet and negotiate with the credit card companies. Irrespective of your situation this is a good first step. Call them, meet them and explain to them about your situation. They may suggest an option if you ask because they want to get paid in the end and something is better than nothing.

  • The pros: You get lower minimum payment arrangements, grace periods with no pay, lower interest rates, and alternate payment plans.
  • The cons: They may not work with you and even if they do so, sometimes it may not be of much help.

Moving on to other options and FYI, a debt relief program may seem very useful but it may have a serious effect on your finance due to the following reasons:

  • It may charge huge fees
  • It may kill your credit and
  • It may leave you in a worse situation than where you are at present.

Therefore, these programs have lots of reasons to cause more pain than providing relief from your ever-rising debts.

Debt management programs:

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DMP or Debt management programs are offered through a credit counseling agency that works with your creditors on your behalf. It reduces monthly payments, rate of interests, and penalties on your debt. You are offered with well-structured repayment plans lasting typically up to three to five years. These are different from debt relief programs that have no guarantee that the creditors will settle and will also harm your credit score.

  • The pros: DMPs are easy consolidated payments offered after proper assessment of your current debt and financial situation. With the fees and interest reduced, it is easy to follow and there will be no more collections calls haunting you.
  • The cons: FTC recommends that you hire only approved credit counseling agencies as there are several that can harm your finance by not judging your financial condition properly. If you default on your payments, expect high penalties. You will also have to close your credit cards so that you do not take on new debt.

Balance transfers:

Suitable for high-interest debt, you can get balance transfers for a fee or even at 0%.

The pros: Interest paid over a fixed time is significantly reduced and you can consolidate your debts easily.

The cons: Do the math to know about the fee to make sure it is worth. Also, be sure not to rack the debt again as your old card will be free after you make the balance transfer and check the rate after the promotion so that it does not hurt you or your finance in the long run.


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A Home Equity Line Of Credit is a revolving line of credit that is secured by the equity in your home. Just like a credit card, you can borrow, pay it off, and then borrow again against it.

  • The pros: The interest rates are lower and tax deductible and HELOC allows easy consolidated payments.
  • The cons: The bank may foreclose on your house if default in repaying the loan. Also make sure you do not use the freed cards again, check the fees and expect variable rates.

And you thought debt consolidation was the only option!