Financial management is a booming industry, with advertisers everywhere offering budgeting and debt consolidation services. These services are required in such large numbers because of the trend towards using credit to fund a lifestyle beyond the means of everyday consumers, which in turn is encouraged by companies armed with marketing geniuses and huge advertising budgets. Unfortunately, there aren’t always easy solutions to some of these problems. That’s not to say they never work; far from it. But if not managed carefully, a debt consolidation program for example can often leave you in worse financial shape than when you started. In fact, over two thirds of Americans who take out such a loan or program end up owing even more money within two years! With this in mind, lets take a look at how these programs work, and how they can be put to work effectively for you.First off, a look at the basics. Debt consolidation programs are effectively just one big loan. This loan is used to pay off and close all of your debts, leaving you with the same gross amount of debt but owing the amount to just one lender. As a concept, this has obvious benefits – you only have one regular repayment to make, often smaller than if you made multiple payments to different creditors. Depending on the term of the consolidation loan, you may find that your repayments can be quite small. It only takes a rudimentary amount of financial knowledge though to see that although repayments now might be smaller with a longer term, over the term of the loan you might end up paying far more, depending entirely on how much interest you pay on the loan.Some of the alternatives to one of these loans are special offers like low or zero rate credit cards. These typically work by offering a much lower rate of interest to anyone transferring balances from other loans or credit cards. These can be an effective stop-gap, working similarly to a consolidation loan in that they get all your debt in the one place and offering even better rates. The low interest period will end eventually though, so make sure that you aren’t caught by surprise when this happens – make every effort to pay off your debt in the 6 to 9 months of the low rate.Another option is to explore some of the specialty lenders around. For example, if you are a serving military member or even a reservist, you can often find competitive rates. Military debt consolidation loans offer benefits like reduced interest rates, more flexible terms, and other benefits.
