Being in debt can be excruciatingly painful, both physically and psychologically. Many people often seek the help of a debt consolidator. But just how does debt consolidation work?

Loosely defined, debt consolidation is combining all your separate debts into a single one. Instead of having multiple bills with different due dates, you now have one large monthly bill. Good, right? Not so fast.

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Feel like you are drowning in debt? It’s time to do something about it.

First, rest assured that you are not alone. There are many, many people who are deep in debt.

Second, more than likely you can pay off your bills and change your spending habits to fit your income. There is example after example of families who were deep in debt and were able to not only pay it off but who ended up in better financial shape than before.

For instance, there was one family who found themselves in such debt (over $100,000) that they had to move in with the wife’s sister. She let them live in her basement.
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Some people think of bankruptcy as an easy way to offload a crushing debt burden, and it’s sometimes the first method they reach for. Well, it may well relieve the burden, but it’s far from easy and should be the very last thing you use to do so.

While the law has made it relatively easy to actually file papers, the process – like any legal proceeding – is far from painless. You will have to justify your filing, exposing all your financial history to a judge and opening it to objections by creditors. If you genuinely owe the money, they’re unlikely to settle happily for 10 cents (or less) on the dollar.
More on Bankruptcy – What To Consider Before Filing

If you use your credit card to buy stuff like beer and expensive customized auto parts, watch out… your bank might think you’re a deadbeat in waiting.
It’s because of the comprehensive profile made of each and every credit card customer. The profile is based on what you’ve bought with your card, personal details you give to customer service reps (like a recent divorce or job loss), the time of day you log in to your online account (Is it late at night or when you should be at work?), how often you’ve been late or missed payments, the balance you carry each month, and more.
It all makes its way into a database that the card companies and their consultants use to determine if you are a good risk for a higher credit limit, which interest rate to charge you, and when it’s likely that you are dodging them and should be scheduled for a call from the collection agency.
(Source: The New York Times)

Posted at Early to Rise

By Tim Phelan

It’s important to be careful when dealing with a credit repair company because in the recent past there have been real scams by unethical credit repair companies who take advantage of people who have already been through hard times. These scams are truly unfortunate and when they are found out the government will step in to prosecute them and/or close them down. The government agency which regulates these credit repair companies is the Federal Trade Commission, also known as the FTC. The fact that a company like Lexington Law has been in the credit repair business since 1993 should be the first sign that the Lexington credit repair service is not a scam.

More on Is There a Real Lexington Law Scam? The Truth About Lexington Credit Repair

There are multiple ways to reduce your total (and monthly) debt load, some less painful than others.

The obvious one, of course, is to simply pay down your debts. That can be difficult, and for some it may seem hopeless. But there is one method that has been employed by many with great success: the snowball method (so named by Dave Ramsey).

More on Debt Handling and Debt Reduction – The Snowball Method

In today’s world our credit score is everything. Creditors and bankers approve or disapprove loans based on your credit worthiness. It is also something that will determine your credibility to certain employers or landlords.

If you have a good credit rating you will be able to apply for loans and/or credit cards easily. And, ultimately, isn’t that the goal? It will also mean that you will have more chances of getting certain jobs. You will be able to pay your bills on time.
More on How to Deal with Bad Credit Reports