Folks who are a little nervous about their current financial situation, which has perhaps been exacerbated by these recessionary times, may be wondering if debt consolidation would benefit them. Consider this: Borrowing a lump sum of cash from a debt-relief agency to pay off a number of creditors, narrowing the field to one payment for one creditor, cannot spell anything but relief – both personally and financially.

However, there are three important scenarios to consider when opting for a debt consolidation solution. The gist being that what must go up will first go down. First, your credit score will take an initial hit from your streamlining efforts. Second, you must remain steady in your payments to the debt-consolidation vendor. Third, you have to reconfigure your spending habits if you want to retain the benefits of debt consolidation.

Scenario One – The Big Hit

As you assume your debt consolidation plan, you will be negotiating with each of your specific vendors about closing your accounts out for once and for all. What you are doing is essentially giving the boot to a number of open lines of credit at one time. Credit assessors view this sort of activity as somewhat abnormal and can deduct a lot of credit points from your score. This is usually a temporary debilitation. It is made even less so when you show that you are truthful regarding your debt payment promises to your consolidation organization.

Scenario Two – The Discipline

Consolidation companies have as their main focus restoring your credit rating and ensuring your financial health. To do so, they are pragmatic about creating a debt situation that fits into a realistic budget for you. But they can only do so much. Your responsibility lies in making your payments on time, every time. You must stick to a budget and be responsible. This is the only way to log positive activity on your credit history and have creditors start believing in you once again. Steadily, solidly, your credit scores will mount with each successful effort to meet your obligations. Day by day, month by month, you will be showing lenders that they can trust you to pay them back that which they have loaned you.

Scenario Three – The Stability

Once the crushing financial situation has been alleviated, you may feel a sense of liberation. Watch that. At this significant cross road, you do not want to allow this exhilaration to lead you into a new wave of profligacy and over-spending. Returning to your former situation, scorned by creditors and friends and family, as someone who obligates him or herself to others and not keeping promises, not paying what you owe. You will be suffering, once again, a sense of financial and personal shame.

The Final Act

You have been given a second chance. Do not blow it. Each time your run afoul of your personal and financial obligations, you will find yourself deeper in a hole than last time. And if you continue, a point will be reached where no one will see the effort of trying to help you as having any benefit. Make sure your final scenario is a good round of warm applause, not the flinging of rotten tomatoes and resounding boos.

By: Jessica M Peterson

http://www.yourloanservices.com/