Debt Consolidation Checklist

Before you enter into debt consolidation - either through a loan or debt management - you need to make sure you ask the right questions. Understand everything on this checklist before finalizing any consolidation arrangements.

• What fees will you pay? Make sure you understand any fees that will be applied to a loan or debt management program.

• What will my interest rate be? Know what interest rate you will be paying. You also need to make sure that it's lower than the average of your current interest rates.

• What will my monthly payments be? Make sure you can handle your monthly payments for your loan or management program. If you can't pay back your consolidation payments and handle your regular expenses, it won't help you in the long run. If this is the case, check to see if bankruptcy might be a better option for you.

• How long will it take to repay my debt? Lower monthly payments will not always save you money. Calculate the total amount you will repay before you commit to a loan or management program. If it isn't going to save you money, it's not a good choice.

• How will consolidation affect my credit? A consolidation loan that is paid back as agreed will reflect positively on your credit. Make sure you understand how a debt management program will affect your credit. If your credit is currently in good standing, debt management may not be right for you.

• Is there another option that would be better for me? Just because you have a lot of debt, doesn't mean that consolidation or management is the best option for you.

If you're having trouble paying your debt, talk with your creditors first. They may be willing to make arrangements with you to help pay the debt and keep your credit good. Make sure you know all the facts before consolidating your debt.

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About the author:

Michael Torrance is a financial consultant with First American Debt Consolidation and Loans, a company specializing in debt consolidation loan alternatives through consumer credit counseling.