Debt Consolidation Management

Debt consolidation management is a term to describe either securing one loan to cover a number of others, or it can mean the service that a credit counseling firm provides to aid a consumer in getting out of debt over a five year period. Because millions of Americans are steeped in a high amount of debt and are living paycheck to paycheck coupled with continuing rising costs of living, the idea of debt consolidation management is becoming more and more of a reality for many consumers. The word management used here is meant to describe either an action or an attitude that a person takes. For example, someone can say, "Enough is enough, I can't take these bills anymore, I have to start managing it." That's an attitude. But once debts are under control and there is actually a light at the end of the tunnel, actual management has taken place of one credit woes. That's action.

Marriage experts often cite money problems as one of the biggest causes of divorce. It's no wonder because owing money can hang on someone like a ninety pound necklace. People have described heavy money obligations as feeling like a person is in prison with no parole in sight. Words like, helpless, chained, depression, slave, angry and useless are words that high debt consumers to describe themselves and their emotions. Charge cards were supposed to be just a convenience so that someone wouldn't have to carry around so much cash. But today advertisers have convinced us that we cannot live without their products and that all of us deserve the good life. Put charge cards and all those glittery products in front of buyers and the result is a situation where debt consolidation management loan providers and counselors are making record profits.

If a person thinks of debt consolidation management as putting all charge cards and installment loans under one umbrella and then taking a large single loan out to cover them, the banks and loan companies definitely want to talk to him. Four or five charge accounts and a car payment and perhaps braces for the eleven year old can add up to a stack of bills on the kitchen table every month that sometimes can feel overwhelming. Additionally, the total amount of the bills can take away most of one's discretionary spending money. The answer might be a consolidation loan to wrap all of those up into one tidy payment each month that will probably be lower than all of them combined. Such debt cares and worries can really hide the true essence of life. Jesus said, "Therefore I say unto you, take no thought for your life, what ye shall eat neither for the body what ye shall put on. The life is more than meat and the body is more than raiment." (Luke 12:22-23)

The finest debt consolidation management loan is a home equity line of credit. Based on the equity a person has in his home, a bank or credit union will issue a loan figured on a percentage of equity a person has accrued. The percentage rates will be adjustable but will be much lower than an unsecured loan that someone would have to get if they have no equity or rent a residence. In most cases, since a home equity lending agreement is a second mortgage, the interest is also deductible from one's tax liabilities. The other type of debt consolidation management lending agreement is an unsecured loan. Since there is no collateral securing the loan, the interest rates are much higher. In most cases, the lending agreement will be offered through a loan company funded by investors who will take higher risks for higher profits. Unfortunately, these loans can have almost the same high percentage rates as the credit cards that a borrower is trying to replace.

The other type of debt consolidation management action plan is through a credit counseling service. Across the country and online, there are many companies, some for profit and some non-profit in structure will negotiate with a client's creditors to get much lower interest rates. These lower rates result in a monthly payment that is about half of what the consumer had previously had. This arrangement, in which the debtor pays one check to the agency each month, and the agency pays each of the creditors, results in complete borrowed money dissolving in five years. In some cases this five year plan can even be lowered, if the debtor is disciplined to pay more than the minimum monthly payment required.

But there is a dark ending to this seemingly happy movie. When a consumer decides to use the debt consolidation management plan of the credit counseling service, a heavy black mark is placed on the debtor's credit history. In fact, the action taken by a credit counseling service is likened to chapter 13 bankruptcy which remains on a credit history report for ten years. For someone who is already struggling with a mountain of debt and might have some late payments on one's history, this could be a devastating blow to credit recovery and eventual respectability. Before a person ever undertakes credit counseling as a last resort, other options to reducing credit should be explored. For example, the possibility of a second job with its extra income would be a good source to helping to pare down debt. In addition, perhaps possession and property thought to be so important at one time could be sold and applied to high debt accounts and oh yes, take the scissors to all credit cards.

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