One has to differentiate between the debt management and debt consolidation options and or processes. The former process involves formulating a plan as well as applying a lot of hard work and self discipline to gain control over your debts and accounts.

The consolidation process involves obtaining a loan to pay all the debts off and then the creditor remains with one single monthly repayment. There are pros and cons to both of these processes, although dependent upon each and every individuals circumstances will determine which is the best route to move forward in.

Debt consolidation plans should be a last resort option; consider the amount that you have paid into an account and then calculate how much more you have to pay until you have settled the account, assuming you do not incur any further debt on this account. Then calculate what it would cost you in terms of interest and finance charges as well as the total repayments if you were to obtain a new loan to settle the current debt that you have.

Unless you have obtained a substantially reduced interest rate it will most likely be an eye opening exercise and you will start to realize the true cost of debt. One of the main problems of this option is that most individuals will settle their debts, have the one monthly repayment and then a few months later they will be spending on these settled accounts again and incur more debt and probably more damage to their credit history.

As stated the debt consolidation process should be considered as a last resort; if you can either secure a low interest rate over a suitable term, or if you are on the brink of defaulting on many of your accounts. In this instance you may qualify for a loan which will in turn reduce your monthly payments, you should however try and remain disciplined in not incurring further debt as this can create a nightmare in the medium term.

Debt management entails the formulation of a rational and logical plan that will address your current financial state of affairs. One of the best things you can do for yourself is to contact your creditors, explain your intentions and current situation; this will be your starting point.

This process does involve a lot of hard work, and without admitting defeat you will have to face many bad habits that you have developed over the years and will have to overcome and defeat these internal enemies. This will involve cutting back on many of the luxuries and unnecessary monthly purchases and splurges, whilst asking yourself consistently if you really need the desired item or is it a want. Budgeting goes hand in hand with debt management, and strict adherence will be a positive aspect to assist you in this process.

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[tags]debt consolidation,debt free,debt management[/tags]