Credit card debt, among other kinds of debts, is arguably the no. 1 cause of the rising debt among US citizens. According to US Federal Reserve G.19 report on consumer credit, as of March 2010 the total of revolving debt in the US is $852.6 billion with 98% of which being made of credit card debt. It is also discovered that an average household in the US has an average credit card debt estimation of $15,388.00. This trend is quite worrying as it shows that we are definitely spending more than we can afford to. When our credit card debt amounts to an overwhelming outstanding balance that is when most of us would panic and wonder how we are going to be able to pay such a large sum of money. One of the solutions to this issue is debt consolidation.

In general, you can consolidate your credit card or other unsecured debts and bills by combining them all into one and applying for a consolidation loan to pay them all off in one lump sum. So instead of having to monitor several different debts to several different creditors, you only have to manage one single debt, and that is your consolidation loan. There are various ways to consolidate your debts and one of them includes converting your unsecured debt into a secured debt by obtaining a home equity loan or a second mortgage. By doing so, you can pay off your creditors by getting a loan against your home. Although the benefit is that second mortgages and home equity loans generally have considerably low interest rates, this particular method of debt consolidation, however, is not always recommended by professional financial advisors due to the fact that there is the big risk of you actually losing your property should you default on the payments.

Financial consultants often recommend that you consolidate your debt by way of debt settlement or credit counseling. The first step will be to have a discussion with your creditors on possible solutions for you to be able to pay the money you owe them. If you are able to convince your creditors that you are indeed very earnest to settle your debts, you may actually get them to reduce your interest rates and allow you to set up a pay back plan so that they will eventually get the money you owe them. This might sound simple but sitting down face-to-face with your creditors is no easy feat. For this reason you might want to consider getting help with debt consolidation discussions with your creditors by appointing a professional third party to act on your behalf. With their deeper knowledge and vast experience, your credit counselor can be your liaison with your creditors in order to get you the best possible solution to be rid of your debts once and for all. Creditors generally do not want to lose all of their money so they are most likely to be willing to give you a significant reduction in the amount of debt that you owe them.

Credit counseling is also another way for you to understand the necessary steps you need to take in order to be debt free. Most credit counselors offer free service to individuals with ongoing debts and will help these individuals to work towards being debt free according to their own budget and financial capabilities. Some, however, will charge a certain fee for their services and they usually include their fees in the monthly payments of your consolidation loan. Your credit counselor will work out a program that is customized to your own budget and preferences to enable you to pay off your creditors whether in one lump sum or in low-interest installments. Some of their methods can be rather radical and you will probably be taken aback by their strict monitoring and tough attitude but it is all done to discipline you into not acquiring any more new debts while you are in the process of settling your existing ones.

One thing you have to take note of is to be wary of the fact that there are many so-called companies offering debt consolidation services out there, especially those that offer their help on the internet, but only a few are legal, legitimate and reputable. You can always check with the International Association of Professional Debt Arbitrators or Better Business Bureau to see if the company offering debt advice is registered with either of these two bodies. If they are not, it is advisable that you look for alternative resources.

It takes a thorough research and probably several discussions with creditors and financial advisors alike to finally come up with the suitable solution to slowly settle your debts. On your part, you have to be determined and disciplined to not add to your mounting debts while you are in the process of settling them. If you are not sure, always ask. Never let your creditors or your financial advisors make the decisions for you. They are there to assist you and suggest possible solutions but ultimately it will be you who will bear the cost and the risks so make sure you fully understand the terms and consequences before making a decision.

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