Using personal debt consolidation loans in conjunction with credit counseling takes what can be an effective weapon in fighting debt and puts it on steroids.
How does this happen? Well, by incorporating credit counseling into your debt relief plan it places the onus to pay down your debts on you. And this is where it should be. Regardless of how you got into debt, the responsibility to get out of debt falls squarely on your shoulders.
Does this mean that you can't seek debt help? Of course not. But it would be a mistake to think that by signing up for a debt relief program you can shift the responsibility of paying off your debt to someone else. In fact, the opposite is true. The amount of success you realize with any debt relief program will depend on how much responsibility you maintain.
The key to getting out of debt is managing your cash flow so that you "live within your means" and have money left over to pay down your debts each month. In order to accomplish this, you need to understand exactly where every penny enters and exits your life...
1. Start with a thorough analysis of your finances. List all of your sources of income and all of your expenses.
2. With that information in hand, prepare a monthly budget that aims to leave 10% to 20% of your income available to apply to your debts each month. That may seem like a lot, but preparing a personal budget and sticking to it will make this achievable.
Aside: If this seems like an overwhelming task, you may want to seek the help of a personal credit counselor. Most will offer a free initial consultation during which they will help you analyze your finances and prepare a personal budget for you.
So how does this work in conjunction with personal debt consolidation loans? It's quite simple really. Consolidating you personal debts does not in itself reduce the amount of debt that you have. (This may seem like an obvious statement, but many people mistakenly think that if they could only consolidate their debt all of there debt troubles would be solved.) The reality is that although the interest rate and term of your debt can be improved by using a consolidating loan, you still have to pay off the debt! And it is only through diligent budgeting on your part that you can really start to apply as much money as you can each month to eliminating your debts.
I would argue that you should only consider a debt/credit consolidation loan after you have gone through the credit counseling process, prepared a budget, and proved to yourself that you can stick to that budget. Once you have done this, then you can consider apply for personal debt consolidation loans.
What if you are unsuccessful with your budgeting efforts? First of all keep at it. Getting out of debt is a process, not an event. And if you can't make a budget work, then a personal debt loan will not solve your debt problems. In fact it will likely make things worse. Instead you should consider some alternative, and potentially more drastic debt relief options.