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Consolidation works best as part of a larger plan to become debt-free; it shouldn’t just be a way to buy some breathing room.

If you are consolidating debt just to get a lower interest rate without really knowing how you’re going to pay the debt off, then you are simply moving the problem around instead of facing it.

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Credit counselors can help with financial basics like creating a budget and managing cash flow, but they can also create a debt management plan for you.

“People usually wait too long to reach out to a credit counselor, because it’s human nature to try to do it on your own,” says Gail Pridgeon, senior credit counselor at Baltimore-based Guidewell Financial Solutions.

A debt management plan typically sets you up to pay off your debt within five years. Counseling agencies are different from debt settlement companies. “If your debt problem is bad enough that you require a debt management plan, then you should also consider making an appointment with a bankruptcy attorney,” says Nerd Wallet personal finance columnist Liz Weston.

Debt consolidation allows borrowers to roll multiple old debts into a single new one.

Ideally, that new debt has a lower interest rate that makes payments more manageable or lets borrowers pay off the total more quickly.

Last modified 02-Jul-2016 21:11