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One of the businesses that is booming right now is that of “credit counseling.” These are professionals who help you with debt reduction through such means as debt consolidation and debt negotiation. The idea is that you can have someone else take all of your debts for you, and roll them into one payment. You pay the professional, and the professional pays your creditors. For some people this works really well. For some, though, do-it-yourself debt reduction is a more desirable choice.

Debt reduction: do-it-yourself

If you are generally an organized person, and you have the discipline necessary, it is possible for you to take care of your debt reduction on your own. But you need a plan that you can stick to. Here are some things you can do to get on track for your do-it-yourself debt reduction:

1. Figure out your income and your expenses. Tote up everything you earn and everything you spend. You might track your income and expenses for a couple of months to get a better idea. Figure out where everything is going.
2. Decide where you can cut back. Look at what you have left over each month, and decide what you can cut back on. Are there ways to reduce your grocery bill? Can you eat out only once a month instead of once a week? Find out how much “extra” money you have each month.
3. List all your debt obligations. Next, armed with the information you have regarding your “extra” money, make a list of all of your loan (this includes credit cards, which are loans) balances and the minimum payments on each.
4. Pick a debt and apply your “extra” money to it. Your minimum payments should have been listed in step one to make this really work. Pick a debt on your list. I think starting with the lowest balance is a good way to feel as though you are making solid progress. Pay the minimum payment and then apply 75% of that “extra” money toward the debt on top of the minimum.
5. Go on down the list. After you have paid off the first debt on your list, move to the next. Note that your “extra” money now includes what you used to pay on your minimum payment for your first debt. So, if your minimum on the first debt is $50 and you have $100 “extra” each month, you will put $75 toward the debt, on top of the $50. Your total is $125. When the first debt is paid off, take that entire $125 and apply it to your next debt. You can see where this is going. You’ll start paying off your debt faster and faster.

Professional debt reduction

If you don’t think that you can do the do-it-yourself version, go ahead and contact a professional. Compare fees and costs, though. Remember “credit counseling” is a for-profit business. You will pay some fees for having someone else handle your debts. And you want to be aware that it can affect your credit score. So be prepared for that.

But no matter which route you choose, it is important to remember that you need to change your outlook on debt if you want to live truly debt free. You need to stop amassing more debt and practice discipline in your discretionary spending. And you need to start saving money. After all, whether you do-it-yourself or get professional help for your debt reduction, if you don’t stop spending, you’ll be right back where you started.
Miranda Marquit is an editor for DestroyDebt.com, an informational site about getting out of debt.

Are you facing the danger of bankruptcy? An IVA (Individual Voluntary Arrangement) might be a less serious solution to your debt. Learn about IVAs and other debt solutions from experts in debt advice and put your mind at ease about your financial situation.

You’ve probably seen the commercials, whether it be on TV or the Radio. A man in a nice suit tells you how he can “pay off” all of your debts. He will tell you about how he can get rid of your multiple high interest payments and give you one low easy payment. It makes it seem like getting a debt consolidation loan is the answer to all of your problems. After you get passed the flashy commercials, you will find that they really do not have a whole lot to offer.

Basically, they will write a check to pay of all of your consumer debt, and then give you a new loan for all the checks they wrote. Usually these debt consolidation loans are second mortgages, which allow them to offer interest rates of about 8% or 9%. There are a number of problems with these type of loans, and are really just not worth your while.

The biggest problem with them is that they do not change your behavior. Debt is not the problem, rather debt is the symptom. The problem is that you are spending too much money, and getting a debt consolidation loan does nothing to stop your overspending habits. So you pay off your credit cards with a debt consolidation loan, and end up just going back into debt because you have a bunch of credit cards with a zero balance and a huge spending problem. It’s just not the solution to your financial problems.

Most of the time you won’t even get the great loan that they present to you in the advertisements. That’s the teaser rate for people with the best credit, but if you have all sorts of debt and need a debt consolidation loan, you probably won’t have the absolute best credit score and will get a less than decent loan. Often times there will be a number of hidden fees which they will use to get a lot more money out of you than you had expected.

Another problem with the loan is that your debt will moved from an unsecured loan to a secured loan. Before they could only yell and scream at you if you didn’t pay your debt, and eventually sue you after many years. Now since it’s a second mortgage, if you don’t pay your debt, then they can take your house from you. You are adding collateral where there was none before.

 The solution is simply not debt consolidation, rather the solution is getting very intense on paying on your debts, and eliminating them. Taking care of a few points of interest really won’t do anything. You think you did something, but in reality, you did not. Don’t bother with debt consolidation.

He will tell you about how he can get rid of your multiple high interest payments and give you one low easy payment. It makes it seem like getting a debt consolidation loan is the answer to all of your problems.