Article by Nancy C. L. Stein, Esq., Staff Writer, PR4Lawyers

Faced with literally thousands of dollars in unpaid high-interest credit card and other debt, Americans are searching for ways to ease their financial burden. Among the popular methods of debt reduction or elimination is debt consolidation. Debt consolidation is used to combine the debts you are paying off such as credit cards, personal and student loans, and car payments. Monthly bills such as rent, water and electric bills and insurance premiums are not eligible for consolidation.

There are a number of sources to consider for debt consolidation. These include:

• Home equity loans, which typically have a lower interest rate than a mortgage
• Mortgage and other loan refinancing
• Government programs such as the Higher Education Act (HEA)
• Personal loans, which tend to have a higher rate than other loans since they are unsecured, but are offered at much lower rates than credit card accounts.

Although debt consolidation can help reduce your monthly payments and streamline your financial obligations, there are risks involved. One of the greatest risks posed by debt consolidation is that most debt consolidation companies will require that you secure the consolidated loan. This means that you secure the loan with collateral like your home or other assets. Should you fail to repay the loan in accordance with the consolidation terms, you jeopardize the property securing the loan. You also may end up paying more in the long run. Therefore, it is important to carefully review the terms and conditions of any debt consolidation loan agreement you are considering.

When consolidating credit card debt on a lower-interest credit card, the credit company may require that you pay off the transferred amount within a specified period of time, after which the rate goes up significantly. Rates may also increase substantially if you fail to make timely payments or seek to carry the debt long term.

Before consolidating your debt, consider contacting your credit card companies and other creditors to see if you can negotiate a better rate or an extended payment arrangement.

In an effort to achieve financial relief and avoid future debt, it is important to determine what caused the financial problems, the severity of circumstances and your ability to repay and avoid future debt. Be sure to take the time to understand the debt consolidation process and how it will impact your financial situation. If you understand how you got into the financial difficulties in the first place, you can come up with a strategy to avoid making the same mistakes in the future.