If you’re burdened with your unpaid bills and want to get out of financial trouble, you may opt for debt consolidation programs. With the help of these programs you can simplify your debts and become debt free.

Debt consolidation programs

A debt consolidation program combines all your multiple debts into a single one. Whether or not you will be eligible for the program will depend upon several factors, like, your credit report, amount of debt you owe, your current income, etc.

All your unsecured debts will be consolidated into a single one. You may have to take a new loan for this, at a lower interest rate. It will be easier for you to make a single payment towards the new loan, instead of paying multiple creditors.

You may take a home equity loan or a new debt consolidation loan to consolidate your multiple debts into a new one. If you take a new loan you may have to use your home or car as collateral.

You will need to negotiate with your creditors to consolidate your unpaid debts, with a new loan at a lower interest rate. You may do this negotiation on your own or get the help of third-party professionals to find out the most suitable consolidation program for you and do the negotiation, on your behalf.

Benefits of a consolidation program

A consolidation program has several benefits which are mentioned below:

• Single payment: This program helps you to make a repayment plan according to how much you can afford. Once your creditors approve the plan, you have to make a single monthly payment to pay off your debt.

• Counseling: If you opt for a consolidation program with a consolidation company, they will do counseling with you to help you realize your financial goals.

• Negotiation with creditors: The consolidation company also negotiates with your creditors, on your behalf, to lower your interest rate and waive off your fees towards late payments.

• Less time: If you opt for a consolidation program, you may get rid off your debts in 4 to 6 years. Thus, in a very short time you will be able to attain freedom from debt.

Debt consolidation programs are beneficial for you if it really helps you to get rid off your debts in a shorter time. With the help of this program you can also pay less than the amount you actually owed. However, you need to be aware of the fraudulent companies and avoid those.

How to avoid fraudulent companies

To avoid scam companies, you need to find the reliable and authentic companies, based on the following factors:

• Proper license holder: Every state has its own list of license-holder companies. Prior to enrolling for a consolidation program with a company, you should make sure that it has a valid license. You can get the list of license-holder companies from the office of the attorney general.

• BBB rating: Every registered company receives a grade from the Better Business Bureau. You can see the rating of the company to know about its credibility.

• FTC: The Federal Trade Commission has a list of companies against which the customers have lodged any sort of complaint. Before selecting a company you can check with the FTC list and find out whether or not the company is reliable.

• Consult with relief networks: You can take help of people associated with relief networks. It has experienced people concerned with debt, so you will get authentic advice/suggestions on the program you may want to opt for.

If you want to opt for debt consolidation programs, you should choose reliable and authentic agencies. You can get list of authorized agencies from the Yellow Pages or from the Internet. You can also get references from friends and neighbors.

Before finalizing with an agency you should make sure that it has legal accreditations so you do not fall prey to a scam and lose your hard-earned money.

About the Author: Jason Holmes is a regular writer with Debt Consolidation Care and is also a contributor to other financial sites. His expertise is woven around various aspects of the debt industry and with his e-books he tries to impart to people the different situations and simple solutions to get out of difficult situations. Some of his works include e-books like Credit Score: The Quintessential Therapy for a Happy Pocket, Take Creditors and Collection Agencies to Small Claims Court, and My Story- From Depression to a Smile.

Consumer debt is the kind of debt you put on credit cards and other types of revolving retail accounts.

What makes this kind of debt so odious is: There are no fixed minimum payments. And there is no fixed term in which to clear the debt. You could be making (mostly interest) payments for decades.

It’s not that hard to rack up large amounts of consumer debt shopping at malls, retail stores, and department stores. Twenty dollars here, twenty dollars there… next thing you know you’ve got some serious financial obligations.

My wife stumbled on a show last night called Clean House: Search for the Messiest Home in the Country. This show shines a light on families who have shopping, hoarding, and cleanliness/organization problems.

Sharon Baglien: Shopaholic in Denial

Last night was a re-run of the third episode of Clean House in which the crew tackled Sharon Baglien’s home in Cincinnati, Ohio. From the first scene, I could not believe what I was seeing. Baglien’s house, garage, attic, basement, and an off-site storage unit were crammed floor-to-ceiling with junk.

I say “junk” because not much of it was getting any use. But the truth is, most of the junk was brand new — still in the box, tags intact!

There was so much stuff in the attic that the ceiling was cracking. There was nowhere to sit for meals. And when the house was finally emptied, it took 400 50-gallon plastic containers, 75 large packing boxes, and 300 large garbage bags to hold everything.

The show’s crew then had to rent a 7,000 sq ft space for the “yard sale” to sell all of Sharon Baglien’s stuff. I was truly stunned.

But what stunned me more than anything else was Sharon’s persistent denial. She repeatedly denied being a shopaholic. She repeatedly excused her own behavior by saying that it was “just 30 years’ worth of accumulation” — as if the amount of time that had passed made everything okay!

If I accumulated for 30 years straight, I wouldn’t have had even a fifth of what this woman had in her house.

Anyway, with such an addiction to shopping and hoarding (she had been paying monthly rent for a storage unit for decades), I have to imagine that Sharon is also facing some substantial consumer debt. And while her situation is extreme, it paints a vivid cautionary picture.

The Problem with Consumer Debt

The problem with consumer debt is that it must be paid off by the sweat of your brow. Clothes and food and dishes and kitchen gadgets and “stuff” all depreciate rapidly. In most cases, you’d be lucky to get pennies on the dollar when you tried to resell your stuff, even if it was barely used.

Cars depreciate, too, but not nearly as fast as consumer goods.

This is a unique quality of consumer debt when compared to secured debt. Debt that is secured can usually be cleared by simply selling whatever was used to secure the debt.

Consumer debt, on the other hand, cannot be cleared by selling the items you purchased. Unfortunately, you will have to work off the debt — or settle it, or declare bankruptcy. And none of those is much fun.

Secured vs. Consumer Debt Ratio

As you take stock of your own finances, pay close attention to the ratio between your consumer debt and secured debt. If you have debt, it’s better to have secured debt.

There was a time not that long ago when the majority of my debt was consumer debt. Now that has changed. I mostly have secured debt now. Which means that in a pinch I could liquidate a few items and clear my debts quickly.

(Of course, being debt free is best of all, but I’m not there yet.)

Another option that I recommend is consolidating consumer debt into a Prosper loan. I did this at one point and it worked really well for me.

What’s nice about a Prosper loan is that there is a fixed monthly payment and there is a fixed pay-off date. You’re not making payments for the rest of your life. The whole point is to pay off the loan. (This is in contrast to credit card companies who want you to carry balances forever.)

Remember: Consumer debt can be ugly. So stay away from it as much as you possibly can. And if you have consumer debt, develop a plan for how and when you’re going to pay it off.

Here’s how to become debt free in four simple steps:

First, you need to assess your current financial situation. It’s kind of like going to the doctor for a physical exam, except this time you’re examining your outstanding loan balances, your monthly income, your monthly expenses, etc.

You need to have a clear picture of how much you owe, how much you make, and how much you spend. This will tell you how bad (or how good) your financial situation is.

Second, you need to look for ways to trim expenses. Some of the best expenses to cut are those that are a) frivolous and b) recurring. Frivolous expenses that get auto-charged to you every month need to be eliminated if you truly want to become debt free.

Look also for ways to save money: on your cars, your house, your food, your health, your entertainment, etc. For many families, it is actually quite easy to cut $100 or even $200 in monthly expenses without much trouble.

Third, you need to put together a plan for credit card debt reduction. Depending on your circumstances, you may want to put together a debt snowball plan. Or you may want to seek Christian debt reduction help.

Every situation is unique and there are no one-size-fits-all solutions. So consider carefully what the best course of action is for you and your family.

Fourth, you will want to increase your income. This is the step that is sometimes hardest. But it is the one step that can really accelerate how fast you become debt free.

You might consider starting a side-business. Your options are endless. There are dozens of opportunities for service-based businesses, as well as online businesses. You may also consider taking a second part-time job.

Okay. These four steps cover the basics. Now here’s the secret…

The Secret to Become Debt Free

So far, I’ve given you the four simple steps to become debt free. But I’ve left out the biggest secret of them all.

The secret is consistency.

It’s always easy to get excited about doing something and pursue it with a passion for a couple weeks or even a couple months. The true challenge is what you do when the excitement wears off and you’re tempted to buy some shiny new toy.

Here’s the truth: You can spend 6 months, a year, or even 2 years following your plan to become debt free. But all it takes is one weak moment to erase all that progress.

Similar to the person who loses 10 pounds and gains back 15, it’s easy take 2 steps forward and 3 steps back — and actually find yourself in a worse financial position than when you started!

So consistency is key. But so is the ability to pick yourself up when you’ve made a mistake. Because, honestly, it’s almost inevitable that you’ll make mistakes along the way to become debt free.

The question is: Will you have the resiliency to forgive yourself, get back on track, and keep moving forward? Only you can answer that question.

The first time you hear “debt snowball,” you’re likely to wonder: What is it? I will tell you…

Did you ever see How the Grinch Stole Christmas — the classic cartoon version? And do you remember how the little dog-reindeer got stuck in a snowball that careened down the hill and got bigger as it went along?

That’s the same idea behind a debt snowball. The more balances you pay off completely, the more money you’ll have available to pay off each successive balance.

Debt Snowball Explained

Let’s say that you have five different balances that you want to pay off. Naturally, each balance is being charged a different interest rate. And you will owe a different amount of money on each balance.

Here’s what you should not do:

If you have $100 extra to put toward your debt each month, you should not divide the money equally and pay down each of your five balances by $20 each.

This may feel good because each balance is decreasing — but it’s definitely not the most effective way of paying off your debt.

But which balance do you attack first? That’s the question.

How to Decide Which Debt to Pay Off First

Usually, you will want to pay off the smallest balance with the highest interest rate. If your smallest balance does indeed have the highest interest rate, it’s a no-brainer. You pay off that balance first.

Then, after it’s paid off, you take what you HAD been paying toward that debt — add it to your debt snowball — and start throwing it at the next balance in line. Here’s a brief example:

Watch Your Debt Snowball Grow!

Extra Money to Pay Off Debt = $100

Debt #1: Minimum Payment = $50

Debt #2: Minimum Payment = $125

In this short example, you pay $150 toward Debt #1 until it is paid off. You then take this amount and add it to the minimum payment of Debt #2. So $150 + $125 = $275.

You now have $275 per month to put toward Debt #2. As you can imagine, you will pay off this debt even faster than you paid off your first balance because your debt snowball is now much bigger.

Imagine how big it will be by the time you get to the fifth and final balance!

Debt Snowball: Better than Consolidation?

Some will tell you that it’s actually more effective and less expensive to use the debt snowball method to pay off your debts.

This is because consolidating debt often has some costs associated with it: balance transfer fees, management company fees, etc.

If you can manage your own finances, and start your own debt snowball program, you may be able to reduce your debt — and ultimately become debt free — faster than you might imagine.

So what’s next?

You might consider searching Google for a debt snowball calculator. There are some free calculators out there that can help you figure out what order in which to pay off your debts.

For believers, Christian debt reduction is a big decision. You desperately want to get rid of debt and finally have peace in your life again. You know you need help, but you don’t want to hire just anybody. You want to hire a believer like you.

So where do you start?

First, it helps to understand the process you will likely go through. There are two options for Christian debt reduction: there’s debt consolidation and there’s debt settlement.

When you still have some breathing room, it’s more likely that you’ll try to consolidate debt, lowering interest rates and minimum payments in the process.

But when you’ve racked up so much debt that you can’t even make your minimum payments anymore, it’s likely that you’ll put together a plan for debt settlement.

Christian Debt Reduction through Settlement

Debt settlement is a process where you stop paying your creditors and save the money you would normally pay them. When you have a certain amount saved up, you then approach your creditors to try to get them to settle with you.

Basically, when you settle, your creditor is agreeing to accept a certain amount of money less than what you owe. Sometimes this can be less than 50% of what you owe.

By accepting your payment, your creditor agrees to write off the rest of your balance.

While some individuals attempt to manage this process themselves, it is strongly advisable to hire a Christian financial organization that is experienced with these kinds of situations. They will be able to manage the process for you and make sure everything is happening according to your plan.

Pay Off Your Debts Faster and Find Peace Again

Unfortunately, when you have crushing debts that you can’t seem to pay off, it can affect you physically, emotionally, and spiritually. Many people have trouble sleeping, get angry, and distance themselves from God.

One of the reasons Christian debt reduction organizations exist is to help believers find peace and draw close to God again. Many times, this can only happen once a certain level of financial stability is achieved.

Did you know that God actually made provisions in His law for people who fall into debt?

Every seventh year was a rest year where you could actually take a break from repaying your debts. Every 49 years God commanded that a Jubilee be kept. During the Jubilee, all debts were forgiven!

Of course, there’s not a country in the entire world that acknowledges or follows this Biblical precept. But wouldn’t a Jubilee be awesome? :-)

Let Christian Debt Experts Help You

Thankfully, there are many believers who sincerely care about how debt is affecting Christians. And they are committed to helping Christians become debt free.

One such organization that I’m aware of is Trinity Financial Mission. It is a non-profit company dedicated to helping Christians find relief from debt.

This is the same company that my brother and his wife are using. They are currently following a debt settlement plan. My brother told me they got their first debt settlement offer from Citi the other day. Woohoo!

It was hard for my brother to admit that he had accumulated more debt than he could handle. It was hard for him to admit that he needed help. It’s hard for anybody, Christian or not.

But if you have reached a point where you recognize the severity of your debt problem, then I strongly recommend getting Christian debt reduction help. Often it’s just a matter of filling out simple web form or picking up the phone and making a call.