Debt Consolidation can be dangerous because you treat only the symptom. If you have a raging balance of payments problem that would shame a third world banana republic and you haven’t come to terms with this fact then Debt Consolidation is only going to provide temporary relief. Without coming to terms with the cause of how you got into the debt in the first place it is a bit like trying to effect the repair of an amputated limb with only sticking plaster and no anaesthetic - it’s going to be extremely painful and have no prospect of long term success.
So what is Debt Consolidation?
Debt consolidation is when you roll all of your smaller individual loans into one large loan, usually with a longer term and a lower interest rate. Note that this does not entail or require you getting a NEW loan at a sexier interest rate and longer term etc. Debt consolidation is the process of combining many existing loans into a one single process and several smaller payments to your creditors.
What Debt Consolidation is NOT is the process by which a consumer exchanges one loan for another taking various factors in to consideration.
Debt Consolidation and Credit Counseling can help you become debt free. To do so however requires that you must understand some basic consumer credit counseling and debt consolidation credit counseling. There is also a price to pay for being able to achieve this.
What is this price?
Well to be brutally blunt your credit record is going to tank big time in the short term. Don’t believe people when they promise otherwise. It isn’t going to happen. Now I know this is a bit like watching a sports programme on TV when the Commentator has an outbreak of Commentators curse and the unexpected happens. In this case this is where some old and wizened debt ridden character emerges from round the corner to proudly declare that their credit rating and record has never been better.
Sorry folks but there is no such thing as a free lunch in this case. Now this should serve as a warning to people who blindly believe that any debt consolidation firm can solve their problems. With a debt consolidation program, you make just one payment per month at a reduced rate.
If you adhere to the Consolidation programme you have managed to set up and the payments go through smoothly then after a while your credit record will start to show regular payments but the initial defaults will be on your file and will show up for anything between three and six years depending on the financial jurisdiction that you live within.
This may well preclude you from taking advantage of the juicy offers in the Sunday Supplements etc but that may not be a bad thing either.
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Stephen Morgan is an independent journalist writing for a number of websites. His latest projects include Debt Consolidation Advice, Living with High Blood Pressure and Stress Relief
Friday, June 29, 2007
Monday, June 4, 2007
Become Debt Free Fast! Consolidating and Eliminating Credit Card Debt
Secured Consolidation loans
Getting a debt consolidation loan is the smartest way to go. Usually a debt consolidation loan requires you to offer some kind of collateral. This greatly reduces the risk involved for the lender and thus helps you getting lower interests and as a rule, considerable better conditions for the loan. On the other side, the use of collateral carries the risk of repossession which is a legal action that the lender can exercise against the property in order to get his money if you fail to meet the monthly payments.
Should you apply for a consolidation loan, bare in mind that you must avoid getting into more debt. This may be difficult as you may feel suddenly relieved by the fact that you now have only one monthly payment. Failing to realize that an increase in the number of outstanding loans will worsen your financial situation will inevitably lead you to bankruptcy and reduce your credit to nothing.
Sometimes you can put your car as collateral if there are not large sums of money involved or if your car has a high value. Otherwise if you are considering using your house as collateral, a home loan or a home equity loan are the smartest options.
Unsecured Consolidation loans
If you can’t offer any collateral, it will be very difficult to obtain a debt consolidation loan. Unsecured consolidation loans are very rare; there is much risk involved for the lender in this kind of loans and thus the interest rates will be too high, the amount of money much lower and the loan length too.
However, don’t despair; there are ways you can improve your credit and get a loan at better conditions. You should start by reducing the amount of money you loose by paying extremely high interest rates. Many people pay thousands of dollars on interests all over the year and this could be easily avoided by searching for the right source of finance instead of accepting any credit card or loan offer that falls to your hands.
Transfer Credit Card Debt
If you can get a 0% rate credit card, do so and transfer as much credit card debt as you can. You should start with the highest interest card in order to substantially reduce the amount of money spent on cards interest. Do not be at ease paying the minimum sum required, you should make sacrifices and try to pay as much as possible. Never miss a payment and avoid paying late.
By this time you should have learned the lesson. You should refrain from getting into more debt once you get some relief by following this advice. Always build a budget and stick to it. And you should never rush in; always make conscious decisions whenever your financial health is involved.
Kate Ross is a professional consultant at Speedybadcreditloans.com. You can click here to read more useful articles on this and other financial issues.
Article Source: http://EzineArticles.com/?expert=Kate_Ross
Getting a debt consolidation loan is the smartest way to go. Usually a debt consolidation loan requires you to offer some kind of collateral. This greatly reduces the risk involved for the lender and thus helps you getting lower interests and as a rule, considerable better conditions for the loan. On the other side, the use of collateral carries the risk of repossession which is a legal action that the lender can exercise against the property in order to get his money if you fail to meet the monthly payments.
Should you apply for a consolidation loan, bare in mind that you must avoid getting into more debt. This may be difficult as you may feel suddenly relieved by the fact that you now have only one monthly payment. Failing to realize that an increase in the number of outstanding loans will worsen your financial situation will inevitably lead you to bankruptcy and reduce your credit to nothing.
Sometimes you can put your car as collateral if there are not large sums of money involved or if your car has a high value. Otherwise if you are considering using your house as collateral, a home loan or a home equity loan are the smartest options.
Unsecured Consolidation loans
If you can’t offer any collateral, it will be very difficult to obtain a debt consolidation loan. Unsecured consolidation loans are very rare; there is much risk involved for the lender in this kind of loans and thus the interest rates will be too high, the amount of money much lower and the loan length too.
However, don’t despair; there are ways you can improve your credit and get a loan at better conditions. You should start by reducing the amount of money you loose by paying extremely high interest rates. Many people pay thousands of dollars on interests all over the year and this could be easily avoided by searching for the right source of finance instead of accepting any credit card or loan offer that falls to your hands.
Transfer Credit Card Debt
If you can get a 0% rate credit card, do so and transfer as much credit card debt as you can. You should start with the highest interest card in order to substantially reduce the amount of money spent on cards interest. Do not be at ease paying the minimum sum required, you should make sacrifices and try to pay as much as possible. Never miss a payment and avoid paying late.
By this time you should have learned the lesson. You should refrain from getting into more debt once you get some relief by following this advice. Always build a budget and stick to it. And you should never rush in; always make conscious decisions whenever your financial health is involved.
Kate Ross is a professional consultant at Speedybadcreditloans.com. You can click here to read more useful articles on this and other financial issues.
Article Source: http://EzineArticles.com/?expert=Kate_Ross
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