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Debt can cause unbelievable amounts of stress, especially when your financial situation is severe enough to cause serious consequences. If you’re receiving daily calls from bill collectors, facing foreclosure, or considering bankruptcy, you already know how serious things can get. The good news is you might have another option.
Debt consolidation can help you overcome financial problems, but it’s not right for everyone. And unfortunately, some debt consolidation companies prey on desperate consumers
What is Debt Consolidation?
Debt consolidation can be a relatively simple process. It allows you to consolidate, which means to blend, multiple debts into a single debt by taking out a new loan to pay off credit card debt. Rather than paying off several debts with various interest rates, you’re able to lump them together under a single loan with one interest rate. This rate is typically on the lower end and usually fixed. The new loan might be unsecured or based on assets in which the collateral is most commonly your home equity.
One of the most effective ways to use debt consolidation is when you are carrying a high amount of credit card debt on multiple cards with variable interest rates. Though it’s possible you can afford the minimum payments each month – keeping you out of too much trouble – you might never be able to put a dent in your overall debt.
Consolidating allows you to combine the multiple credit card debts into a single loan and focus on paying down your debt, instead of just treading water.
Benefits of Debt Consolidation
- Your monthly payment will likely be lower but you will pay more money over time.
- You only have to pay one creditor, your debt consolidation lender.
- You likely won’t be getting collection calls.
Negatives of Debt Consolidation
- Paying more over time because payment terms increase the length of time you pay. You pay less each month, but more in the long run, unless you have a penalty-free option of pre-paying.
- You might not lower all of your interest rates. In order for debt consolidation to be beneficial in terms of interest, you must currently be dealing with high interest rate cards.
It’s also important to not get into more trouble once your consolidation loans pay off your credit card balances. It might feel good to have available credit, but if you’re serious about improving your situation the last thing you need to do is use those cards.
Is Debt Consolidation Right for You?
Before taking out a debt consolidation loan you should consider other options like Chapter 7 Bankruptcy. With a Bankruptcy, you may be able to discharge all of your debt and save untold thousands of dollars that you can then use for future savings.
Another option would be to settle your debts individual using an attorney debt settlement Company. At Weston Legal we can provide you with many of the debt alternatives.
For more information contact us at 1.800.220.4318 for more information or to schedule a consultation.