Reduce Debt Today

Debt consolidation can allow you to reduce debt, interest payments and the overwhelming stress of credit card bill collectors. Debt consolidation enables you to fix problem debt.

Debt consolidation helps debtors manage debt that has accumulated beyond their control. Almost everyone has to borrow money at one time or another. When someone borrows at a low interest rate to obtain something expected to grow in value, some say that is good debt. Examples of good debt may include a home mortgage.

Problem debt is debt carried at a high interest rate often generated by acquiring material things beyond a debtor's income. Examples of problem debt include using credit cards to buy fancy electronics or to pay for expensive vacations without the means to pay for them within 90 days. Rather, the debtor takes months or years to pay for them, spending far more than the original items cost. Most credit debt is problem debt. Another example is buying a car on a six-year loan and keeping the car only three years. When one accumulates problem debt on a regular basis, one loses financial control quickly.

As a first step to regain financial control, stop accumulating problem debt. Take the following actions:

• Cut up all credit cards except the one with the lowest interest rate. Use that credit card for emergencies only.
• Make a list of all your problem debts and start paying down those debts with the highest interest rate first.
• Review all of your expenses and cut out those which are not necessary.

If you have multiple problem debts, especially credit card balances, consider using a debt consolidation loan to eliminate the debt and combine it onto one loan. This can be done with either a secured loan, such as a home equity loan, or by obtaining an unsecured personal loan from a lending institution or a debt consolidation company.

A secured debt consolidation loan offers the greatest savings due to the low interest rates available on home loans, but it does risk your home if you miss payments or default on the loan. An unsecured loan carries a higher interest rate than a secured loan, but the rate is likely to be lower than any you are paying on credit card balances. In either case, the loan pays off the problem debt.

Establish a budget and follow it precisely. Also, practice discipline to spend less money than you earn and open a savings account to provide for an emergency.

Author Bio: Scott Sumerford has several years of experience working in the financial industry and has written a myriad of articles on various financial matters. He graduated from the University of Texas at Arlington where he worked as a writing center tutor and contributed to the university's newspaper, The Shorthorn. Read more about how MyUSADebt offers viable alternatives to debt consolidation.

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