When looking around at ways to take care of debts, its important to keep several questions in mind. It is also important to understand that debt consolidation can mean many different things like: debt settlement, credit counseling, home equity loan, line of credit, and second mortgage. When you consolidate your debts, you are merely taken one pile of separate debts and piling it into one single payment.

Ask yourself the following questions:

1. Is my debt secured or unsecured?

If you debt is secured then this means that it is directly tied to an asset such as a car, home, boat, etc… If you do not pay this debt back you will most likely lose the asset through foreclosure or repossession. An unsecured debt is a debt that is not tied to any asset. This would include credit cards, medical bills, personal loans, etc…

If you have only unsecured debt, they you should consider credit counseling, debt settlement, or a loan. If you have secured debt, then you will need to seek out an immediate way to meet your monthly payments, otherwise you will most likely lose your asset. Its appropriate to take out a second mortgage or home equity loan to help pay off a secured debt. It is not recommended to take out an equity based debt consolidation loan to pay off unsecured debt.

2. Am I behind in my payments or am I current?

If you are current with your bills then you will want to consider your possible loan options. Most types of debt consolidation will potentially hurt your credit. If you credit is already damaged or severely damaged, then debt settlement and credit counseling may be your only options.

3. How much debt do I have?

To qualify for most debt consolidation programs you will need to have more then 4,000 in unsecured debt. If you do not have this much you may not be able to qualify and credit counseling or a loan will be your only options.

 4. Are my accounts so passed due that they are now defaulted?

If you have already defaulted on many of your accounts then you have two options honestly. You can either choose to enter a debt settlement program and try to negotiate a payment on your debt or you can file bankruptcy. A loan is most likely completely impossible at this point.

5. Do I care about my credit or has it already been severely damaged?

If your credit has been damaged or you really don’t care that it be hurt, you may consider debt settlement or credit counseling even if you are current with all of your payments.

6. Do I own property such as a home, car, boat, or business asset?

If you own property you may be able to take out a loan against that property to consolidate your outstanding debts.

7. Do I have anything I can sell?

Rather then turning to a loan or debt program, why not just sell an asset to pay off your debts. Its quite common for people struggling with bills to sell cars and property. Its better then taking out a loan in the sense that you are creating more debt.

Choosing a debt recovery program that suite you the best can be a long and difficult search. You really need to analyze your financial situation and compare where you are now to where you want to be in 10 years. The decisions you make now will affect your credit for years to come, so plan very carefully.