Debt consolidation consists of rolling all of your debt into one loan or line of credit. This consolidation allows you to make one monthly payment at one fixed interest rate. Usually the interest rate on the new debt is lower than the original loans, which creates a long-term savings. Following some debt consolidation tips and guidelines can help ensure that your debt consolidation is a successful venture.

Get a Big Picture View of Your Debt

In order to understand the debt you’re in, make a thorough list of all the debts you have and want to consolidate. Include the interest rates for each debt and the balance you owe. Creating a written list allows you to see where your spending weaknesses are and account for every dollar of debt. The written list lays out a road map for you to determine which debts should be tackled first, allowing you to put together a plan of attack on consolidating and getting rid of high interest debt first and then working your way down the list.

Select the Right Company

Although you can consolidate on your own, a debt consolidation company is an option for some who cannot manage consolidation alone. Shop around for a company that is well established and highly experienced. Debt consolidation companies charge fees to help you create a written plan on how to consolidate debt and then to help you implement the plan. Make sure that the fees are not exorbitant. Ask the company for references and then contact the references, if possible. By law, debt consolidation companies have to provide you with a written agreement that spells out your working relationship, including fees.

Choose the Best Plan for You

Several debt consolidation options exist. Credit card counseling can help you to lower your interest rates on credit cards in order to pay off the balances more quickly. Credit card consolidation places all of your debt on one lower interest rate credit card. A debt management plan involves you depositing a sum of money with a debt consolidation company each month. The company uses that money to pay off your debts on a schedule that they have negotiated with your creditors. A consolidation loan is a personal loan to pay off all of your creditors, leaving you with just one payment each month.

Be Patient

The debt did not accumulate overnight and it is not going to disappear overnight. Once you have a plan in plan, stick with the program until the debt is completely paid. Keep track of the total and watch the amount come down each month. Each payment brings you closer to financial freedom.

Make Payments on Time

The debt consolidation process is a prime opportunity to train yourself to be wiser with money than you were previously. Put your monthly budget on paper, so you can see income and expenses. Make every effort to pay your bills on time, every month. Check with your former creditors to ensure payments from the debt consolidation company are on time. If the debt consolidation company is not paying on time, it can hurt your credit further.

Stop Spending

Many think that debt consolidation solves financial problems. It does not. It helps a debtor pay off outstanding debts at a specific time in his/her life. Debt consolidation does not account for continual spending after the process has begun. Some programs offer financial counseling to help you build appropriate spending habits, but the overall goal of debt consolidation is to get you out from under the current debt. Do not use this opportunity to go out and spend more. Instead, look at the habits that caused your debt and train yourself to avoid those pitfalls.