With personal debt exploding and bankruptcy laws tightening, consumers are furiously seeking viable forms of relief. For those of you who keep up or nearly up to date on your credit card payments, but only make the minimum payment or just over the minimum and find your balances going nowhere, there is a solution… called debt consolidation. This is not to be confused with a debt consolidation loan that simply exchanges one debt for another and, in many cases, requires the family home to be put up as collateral. In financial circles, converting unsecured debt (credit cards) to secured debt (home) is rarely considered a good idea.

The main benefit of debt consolidation is the reduction of those killer interest rates, which means more money goes toward principal. For example, let’s take a credit card with a balance of $10,000 at 21% interest. Most creditors require 2% of the balance as a minimum payment. Under this scenario, your monthly payment would be $200, but only $25 of that payment will go toward principal! It’s also not too hard to see that, at this rate, it could take 30 years to pay off this card, and that’s without any more purchases being made. Be aware of late fees, annual fees, and over-limit fees, etc. And it’s no wonder credit card companies are reporting record profits, all at the expense of the hard-working consumer!

For clients who are behind, the program may offer additional benefits. You can stop calls from creditors which can be very annoying, stressful and sometimes embarrassing. You can also re-age the beads. This means that accounts will be updated after 1-3 on-time payments through the program.

Another benefit for all customers is what is called the “snowball effect.” This means that once a creditor is paid, the money scheduled for that creditor now goes to a remaining creditor in the schedule; usually the one with the highest interest rate. This continues until all creditors have been paid. Since the average consumer has 8 credit cards, this can greatly speed up the time required to pay off these debts while saving the consumer thousands in interest costs.

If this sounds like a program that would help, then the next step is to choose a reputable credit counseling agency. Since there are so many to choose from, one must do their homework. Look for one that is not-for-profit, has NACCC-certified assessors, is ISO-accredited, and belongs to an industry association like AADMO. Make sure they do a budget analysis, provide a plan of action, explain things clearly, and answer each and every question to your satisfaction. Reputable agencies will give you time to think things through, won’t try to rush you into a commitment, and will allow you to select a payment date that works best for your cash flow.

Lastly, don’t despair. There is definitely help and a light at the end of the tunnel. If some or all of the warning signs above hit the spot, then it’s probably time to do something. Just do your research and don’t procrastinate, because a small problem can quickly turn into an insurmountable one. The experts at Debt Options are ready to advise and assist you with this and other possible options, such as debt settlement.