Is Debt Consolidation a Good Idea - Evaluating the Alternatives

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Because of the economy, people are looking at the way they manage their money differently than they have in the past.
They are asking the question, is debt consolidation a good idea.
Whether it is good or not all depends on your definition of debt consolidation.
  There are two very different kinds of debt consolidation--one that requires a loan and one that does not.
And there are two frequently used types of loans for debt consolidation.
The first is a home equity line of credit.
You must be credit worthy and own a home to qualify for this type of financing.
  The second type of debt consolidation loan would be to transfer all of your credit card balances to a low interest or 0% interest credit card.
If you continue to use the old credit cards you are defeating the purpose of transferring your balances.
You will have more debt than before.
You credit will have to be good enough to qualify for the new credit card.
  Personally, I think taking out more credit to resolve debt is asking for trouble.
If you make this choice, you should be prepared to be disciplined about making on-time payments and not incurring further debt.
  There are a few options for debt consolidation that do not require a loan.
Credit counseling is a service that will manage all you unsecured debts.
Your interest rates will be reduced and your fees eliminated.
You will make one payment per month to the debt counseling agency and they will disburse it to your lenders.
Debt settlement is your fourth option for debt consolidation.
It is a bankruptcy alternative and I do not recommend it unless there is nothing else left.
It will pretty much ruin your credit.
This method reduces your outstanding account balances through a negotiation process with the lender.
You can negotiate with the lender yourself or have a debt settlement service do it for you, but you will need $10K in debt before a service will take you as a client.
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