A Few Words of Advice Regarding Debt Consolidation...

Your Home is Not the Solution

If you're thinking of taking out a home equity loan for debt consolidation purposes, it's probably not the best idea. Home equity loans use home as collateral. If for some reason you can't make your monthly payments, you won't just wreck your credit, you'll lose your home. As a general rule, you really shouldn't replace unsecured debt with secured debt.

Not all Debt Consolidation Services Are Created Equal

If your credit card debt is completely out of control you might want to consider debt consolidation services. The problem is, not all of these services are created equal.

Before you sign up for any debt counseling or repayment plan make sure you research the company. Some of these services are little more than well-designed scams meant to rob you of your hard-earned money. Go with a service that has a good BBB record and do research online. If other customers have had problems with a particular service, chances are you might too.

When you do find a good service, read over the paperwork very carefully before signing anything. Make sure you understand exactly what the debt consolidation service is going to do for you, and how much they're going to charge to do it.

Some companies will negotiate lower interest rates with your creditors while consolidating your payments. Others will just consolidate and put you on a budget. It's important to know exactly what you're getting for your money.

And remember, not all debt consolidation is problem-free. Your credit report will usually show that you are undergoing a debt consolidation and counseling program, which is better than multitudes of late payments and bankruptcy, but your credit rating may still take a hit.