Once you know what your goals and your options for paying your debts need to know what the best option for you.

It is very important to understand the difference between:

1. Debt consolidation.
2. Debt Negotiation.

The consolidation and debt negotiation have their advantages and disadvantages. To see the advantages of debt consolidation and click here to see the benefits of debt negotiation click here.

Compared to debt consolidation, negotiation may seem advantageous, since it actually negotiate with creditors to avoid having to pay part of the money you had paid and cancel it as bad debt.

Pepe Imagine a bank borrowed € 1000. When the bank asks you back Pepe Pepe money tells the bank to 400 € if you will forgive the remaining € 600. Sometimes creditors accept these agreements can cost as much effort and sometimes money to recover the remaining € 600.

Although this may seem like a dream come true, has many drawbacks associated:

1. Is displayed on your financial history you took out a negotiation and you came to an agreement that did not pay all your debt.
2. Although it is a better option than having a debt in your history, is very harmful for you, as any future creditors will see that you have not paid the full amount of your debt in the past.

When should you choose to consolidate your debt and when to negotiate?

1. If you have outstanding debts to more than one creditor for you debt consolidation.
2. If you think you have too much debt, there is no way you can afford them and that can go into bankruptcy, then debt negotiation is the right solution for you.

What is the purpose of debt consolidation?

The main objective is to get a lower interest loan with lower monthly payments without risking your property.

The debt consolidation loans are helpful for people with high interest on their debts and they have difficulty paying bills each month.
Main advantages of debt consolidation

1. Merge all your debts into one: Suppose you have five things different, the home mortgage, car loan, personal loan and some money on two credit cards, you need to be aware of each of those debts and pay a 5 bills each month. With debt consolidation your 5 debts will be consolidated into one, so you will need to pay only one bill each month, making it easier to plan and budget your expenses.
2. Reducing the average interest rate on the total amount: With five different debts, the higher interest rate can be as high as 18% and the lowest interest rate may be 3.5%. After consolidation, the consolidated debt may have an interest rate of only 3.5%, so your average interest rate is significantly reduced and therefore your overall debt and you have to pay each month.
3. The debt consolidation loans can reduce the total amount of money you pay monthly, that is, after consolidation you pay less money in the single monthly payment that you pay now by adding all your monthly payments.

Try to avoid loans being asked to pay very high monthly amounts or promise you a very large reduction of your debt, as they are very risky.

* Cost of Loan: normal are small fees, so you should avoid paying high commissions.
* Interest on loan: interest on the loan usually will be lower than your credit card. If the interest is high does not interest you, because you could not make loan payments. Try to get fixed interest for the monthly fee does not vary.
* Loan Fees: The monthly fee should be less than the sum of everything you’re paying now separately.
* Effect in your history: Make sure you explain well what is before you sign the loan and avoid those entities that are not clear on this.

* Calculates the sum of all the money you owe.
* Think how much money you want me to pay for consolidation.
* Find out about the loan conditions in different entities, as some charge you if you cancel the loan early.
* Calculate the difference between your income and your monthly expenses and reserve an amount for emergencies. The resulting amount by subtracting the revenue expenditure is what you can pay monthly for consolidation.
* Perform all calculations carefully, because if you can not pay the fee to be worsening your debt consolidation.

* In some cases, even pay less money per month and interest on the loan are lower, if you’re paying the loan over time at the end you will pay more money.
* If you have to put your house or any other possession as collateral to grant you the loan you risk losing them if you can not repay the loan.
* The lower interest rates mean that the lender is risking less money to lend, that is a good chance that you pay them, even staying with your home.
* Some nonprofit agencies that provide loans to consolidate debts can persuade you to let them manage your money.