Debt consolidation services; do you really need their help?

Open any newspaper, magazine or web page and you will find plenty of bad/depressing news about today’s economy: unemployment is higher than 10%, foreclosures are rising, healthcare and education are becoming more and more expensive and as a result many people are drowning in debt.

In order to solve there financial problems and save whatever is left of their credit rating people turn to debt consolidation services, but do you really need their help? Can they do something for you that you can’t do yourself? Is it worth paying someone else to do what you can do on your own?

What is debt consolidation and what can debt consolidation companies can do for you?

Debt consolidation is combining your debts into one large long term debt you repay over long period of time. What debt consolidation company will do for you: combine your debt, try to negotiate a lower rate, try to settle you accounts. They usually charge 10% fees for their services. After all said and done you could actually be worse off than before. It would be smarter to pay these 10% fees toward your debt.

Here is what you can do on your own:

1. Make a list of all your credit cards and personal loans; write down amounts that you owe and phone numbers for customer service.

2. Start calling them: ask for interest rate reduction, payment reduction or settlement options.

3. Explain your personal situation (loss of job, medical emergency, divorce, whatever it may be (It may be embarrassing, it may hurt your pride, but...).

4. Ask for everything in writing (new interest rate, settlement option etc…)

5. Make arrangements and stick with them.

If you can not do it on your own it is a better idea to turn to a non profit debt consolidation and credit counseling companies for help. They can also help you with money management and budgeting.

And of course, the most important thing is no new debt, change you spending habits, and live within your means.
Know your rights as an American; you are protected by Fair Debt Collection Practices Act.

http://www.ftc.gov/bcp/edu/pubs/consumer/credit/cre18.shtm  answers commonly asked questions about your rights under the Fair Debt Collection Practices Act. It prohibits debt collectors from using unfair or deceptive practices to collect overdue bills that your creditor has forwarded for collection