There are certain questions that you need to ask yourself before you enter into the realm of debt consolidation. You may think you're ready, but if used improperly or at the wrong time, the process can provide a gateway to more debt and more problems while offering only short term relief from payments. Remember, when you're up to your eyeballs and feel like you're on the brink of being overwhelmed, sometimes your poise and ability to calmly sort through the mess is the bets (and only) asset that you have.



First, you have to be ready to cut up all your credit cards. Better yet, close the accounts so the only thing you can do is make payments on your balance. If you're this far along the debt game, you might have had that done for you already by the creditors themselves. Good! They did you a favor and saved you some time. Closing a credit account can take anywhere from 10-30 minutes, and that's time you don't have right now.

Once you've made the personal commitment to stop living on other people's money, sit down with a pencil, notepad, and a calculator. Find copies of any bill that you have laying around that shows your recent account balance for each and every credit card (or any other form of debt), and start writing. You want to find the balance, the minimum monthly payment, and the interest rate that the company is charging you on your balance.

Now start writing down all your monthly expenses, beginning with your rent or mortgage, groceries, utility payments, cable, internet, phone, gas and anything else that you pay every month. Once you have all this information listed, take a new sheet of paper and write down your monthly income (take home) at the top. Start subtracting the essential monthly bills from that amount, and keep track of the total. At the very top of your list should be rent, utilities, and groceries. Gas for getting back and forth to work should be high. Your car payment should be right up there as well.

Once you have all your essential monthly expenses listed, look at the total remaining money left from your monthly take home pay. That's what you have to put towards a debt consolidation loan, and that's what you should base every penny that you spend on. If your monthly essential list totals up to more than you take home, there are some additional steps that you need to take first, such as getting rid of a car payment or cancelling your cell phone or cable television.