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"My problem lies in reconciling my
gross habits with my net income."

Errol Flynn
Don't Tell Me You're Serious Unless You're Serious

Debt consolidation is actually a sensible strategy for a lot of people who are in debt. But it’s also an area where people in debt can compound their problems by making even more mistakes. The best way to be sure you’re doing the right things to move you toward financial freedom, you need to lay the right groundwork.

Do the right things first, and you’ll be much more likely to find the debt consolidation answers you need. Get sloppy, rushed, or lazy in the beginning, and you’re the perfect target for scam artists. Even if a crook doesn’t take you in, you can still wind up with the wrong plan which means you’ll end up doing the same amount of work (or more) for less-than-the-best results!

Debt consolidation is serious business, and it’s worth a little of your time, effort, energy, and concentration to do it right.

The very first step is not very hard. You should talk to somebody who knows about money, loans, and credit. There are probably lots of these people nearby—they work at banks. Go to your bank (or any bank, for that matter) and ask to talk to a loan officer or financial advisor. If the bank has a receptionist, simply explain that you are considering debt consolidation and would like to meet with somebody to discuss it. Come prepared to meet with a person right then and there, but don’t be dismayed if you end up having to make an appointment.

This first appointment should be free. Most banks will offer this service as a courtesy because they also make loans. But just because your advisor is not charging you does not mean you should waste his or her time. Bring a list of your debts and other financial information. (You should have a list of all of the debts you owe on credit cards, for loans, car notes, and other debts; bring mortgage information if you have one; bring a pay stub and your spouse’s pay stub, if applicable.) Be prepared to briefly and objectively outline your situation.

Chances are your advisor will want to know your assets (do you own a house? Do you have an account at that bank or other banks? Do you own stocks or mutual funds? Do you have a 401(k)3 plan or other retirement program?) What is your employment history and pay? Your advisor will also need to see a list of all of your debts and regular bills.

The great thing about bank officers is that they know all about credit, bank policies, and different ways to consolidate debts. Your advisor may be able right then and there to propose a solution. In some cases, a fairly simple plan may be all that is needed to consolidate your debt.

On the other hand, your bank officer may feel that your situation requires special expertise or resources beyond what the bank typically provides. The good news is that most bankers will be able to steer you in the right direction. Your banker should know the names of reputable local organizations that can help you.

Oddly enough, many people in serious debt overlook the incredible resources at their local bank. While I tend to favor going to your own bank first, most banks will offer this service to you, even if you’re not a customer.

Let’s say your banker urges you to find a debt consolidation company. The banker should be able to refer you to at least one if not several such companies.

One caveat. It is much saner for you to approach a debt consolidation company than the other way around. In fact, you’d be wise to never do business with a company that contacts you. You should find them—it helps to assure that they are legitimate businesses that can be “found” in the community, not somebody setting up shop from his car and only in town until the cops get wise.

Fraud is everywhere that money is, and debt consolidation is no different.

When you go to a debt consolidation company, you’ll basically go through the same steps again: describing your situation and showing your paperwork. You’ll again be subjected to a battery of questions. At this point, the company will tell you what, if anything, they can do.

The next step—whether your bank can help you or whether you are considering going with a debt consolidation outfit—is to find a neutral certified credit counselor. These are people who are trained and recognized as credit counselors. The great advantage to their services (and they do charge; ask before you go) is that they do not work for a bank or organization.

Your bank advisor and your debt consolidation expert are probably fine upstanding people, but they are naturally going to try to steer you toward the solutions that their organizations offer. A lot of the time, they represent organizations that offer precisely the services you need. Even if they are not trying to be biased, they are always going to know their own products better than the other guys' products. So they are probably giving you good advice, but is it the absolute best advice?

A certified credit counselor is neutral in all of this, plus he or she will know the latest laws, the biggest scams, and what is going to work for you. Many people who make a mess out of debt consolidation omit this step of consulting with a certified credit counselor.

Once you have figured out what you’re going to do, you may even want to hire an attorney to go over any documents you’ll need to sign. Sometimes people worry that all of this professional advice is too high priced, but debt consolidation involves your entire life savings now and can impact your financial future, too! You need to be very wise, and sometimes that means bringing in the experts. Besides, you’re not likely to need a lawyer’s services for a long period of time. Just one or two appointments is probably all that is required.

 The right groundwork can spell the difference between a successful debt consolidation and just another financial mess.

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