Debt Consolidation in America: The New State of the Union

More Americans are in debt than ever before. The average Joe has about 13 monthly payments. This includes regular expenses, such as a mortgage or rent, but the majority of payments are to credit cards.

In 1999, Americans spent $1.1 Trillion in credit card purchases. This figure only becomes more frightening when you consider the interest that is paid on such a huge amount of money.

If you're like most residents of the US, you're spending 112% more money on credit card purchases than you would if you just paid cash. This is because of interest and finance charges that credit card companies charge for their services.

To make matters worse, a study by the Federal Reserve in 1992 showed that Americans spend about 41% more each month than they earned. Unemployment has also increased in the last decade.

So, with all this money going out and less coming in, many Americans are finding themselves crushed under the weight of debt. Debt consolidation is a popular and successful way to face these challenges.

How does it work? Well, there are many options for individuals experiencing too much debt.

If you're a homeowner, you can take out a home equity loan. These are "secured" loans that are often offered at low interest rates. They do have one major drawback, though. If you're unable to repay the debt, you can lose your home.

If you're not a homeowner, but have good credit you may be eligible for an unsecured personal loan. With lower interest rates and flexible time to repay the loan, you can save money.

You may be able to transfer the balance of high interest credit cards to one card with a lower interest rate.

Finally, if you're unable to get a loan, a debt management program may be helpful. You may be able to lower your monthly payments and pay your debt back faster.

Like many Americans, you may find that debt consolidation will save you time, money, and may even save your credit.

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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.