"...if you only make the minimum payment, your months to pay off will be INFINITE. That means you NEVER get it paid off..."

Debt Consolidation: What You Should Know

The average American family has $5000 or more in unsecured, credit card debt. Just for grins, we tried the BankRate calculator available at Bankrate.com. If a person has a credit card with no more than $5,000 in debt and is lucky enough to still have a preferred interest rate of 9%, a payment of 75.00 per month will pay off the debt in 92 months. That's 7.6 years, folks. And the total paid will be $6,900.

Not bad, so long as the interest doesn't go up—just because the bank decides to raise all their rates, or you don't default and end up with a much higher rate. But what if?

Let's say that typical debt of $5000 has gone into the default rate because you lost your job and couldn't make the payments. The default rate is 29% (although last year the Feds approved rates up to 42% at the discretion of the states). At 29% you must pay $158 per month, without adding any more to the debt, in order to have it paid off in five years. And by then you will have paid $9,922 and change. That's just to cut up the card and pay off the debt--unless you choose to end the nightmare with debt consolidation.

According to the calculator, if you only make the minimum payment, your months to pay off will be INFINITE. That means you NEVER get it paid off.

And you know what? Credit card companies love it that way. That's why they raise the rate, calling you an adverse risk, the minute you have a financial crisis. If you just pay the minimum, they will have the total amount owed in record time, but you will still have to keep on paying.

Fortunately, there is a better way. Credit card companies know they will get their money because the outlandish rates virtually guarantee it. But they also know those rates are not necessary in most cases. They do it because they can. However, when you work with a debt consolidation company, they will help you combine all your debts into one, and make one payment, usually much lower than adding up all the individual debts.

Debt Consolidation is NOT a debt consolidation loan. It does not give you a lump sum of money to pay off the current debt, leaving you free to mount them up again—with the new one added on. A Debt Consolidation company will work with you to find out what you have in household income. They will make every attempt to come up with a payment you can live with; then they will contact your creditors and negotiate for a reduction in your interest rate. If you have already paid months or years at the high interest rates, they can also get some of that interest applied to the principle, thereby lowering the overall balance. The company will collect one payment a month from you and will divide it accordingly among all your creditors. The difference? Instead of hoping to get out from under by increasing your payments and tightening your belt for at least five years, you may be able to be debt free in as little as three or four years. And you will have more money in your pocket during that time.

You may have already considered bankruptcy, but that is never your best option. Have you heard that it only stays on your credit report for seven years? Think again. Some companies—such as mortgage companies, for example—may ask if you have EVER filed for bankruptcy. Your credit is damaged for too many years of your adult life. And, the company can—without your knowledge—put liens against your property and life insurance, forcing your heirs to pay when you die.

While bankruptcy completely destroys your credit rating, the successful completion of a debt consolidation program will actually repair and restore your credit. In as little as four years, you may have companies offering you more new credit than you would ever want. At that point, you'll just have to remember to say, "no, thank you." Start here, and get help now.