Debt Consolidation Loans and Credit Card Charge-Offs |

In a sign that fewer consumers are heading for debt consolidation loans, credit card charge-offs fell in April, according to a report from Moody’s Investors Services. Charge-offs are credit card balances that the card issuers have written off as being uncollectable. When the number of these falls, it’s a sign that consumers are not falling quite as deep into debt. This is a good sign for the economy overall; consumers will be more willing to spend on everything from home-improvement goods to new cars to electronics if they aren’t as deep in debt.

Positive Numbers
Moody’s reported that credit card charge-offs dropped to 10.91 percent in April. That’s down from a rate of 11.21 percent in March. Moody’s officials also reported that that the dip serves as evidence that uncollectable credit card payments might have peaked in the first quarter of 2010. This is good news for consumers. Debt consolidation loans are useful tools for consumers facing overwhelming debt. But they do come with certain negatives. Consumers will lower their three-digit credit scores if they take out debt consolidation loans. Lenders see such loans as a sign that consumers have been irresponsible with their finances. Also, debt consolidation loans come with high interest rates and fees. Consumers will often end up paying more than they would have had they simply paid their debt on their own.

Fewer Consumers in Trouble
Still, for consumers who may have lost their jobs – and there are many of them – or have watched their annual income drop, debt consolidation may be an only option. In such instances, consumers need to do their research before consolidating their debt. This means asking the right questions before working with any consolidation company. Consumers need to request, in writing, the exact fees and rates they’ll be paying. They also need to know how long it will take them to pay back their debts and how much interest they’ll pay while doing it. Educated consumers increase their odds of working out a debt consolidation arrangement that works best for them.

Promising Financial News
The Moody’s report, though, provides more evidence that consumers are finally starting to dig out from the country’s financial mess. No, most people aren’t exactly thriving financially these days. But for many, the pain has mostly stopped. Now it’s on to recovery. For those who have taken out debt consolidation loans, that means making a vow to never run up large amounts of debt again. For many, it may mean a change in spending habits or, for the most severe of over-spenders, an appointment with a credit counselor.