Loans Vs Debt Consolidation Programs: What you Need to Know!
consolidation companies offer Consolidation loans that people
use to combine all existing consumer debts or credit card debts
into a single loan and one monthly payment. These loans are
often secured by some form of collateral, usually the family
debt consolidation loan also may be secured by a co-signer who
will be liable for the debt should the primary signer default.
Unsecured loans for bill consolidation also exist but the high
interest associated with them may be even greater than your
current credit card interest rates.
debt consolidation loan allows borrowers to make payments to
a single creditor rather than to many creditors who compete
for loan repayment. Debt simplification is appealing to many
people whose personal finances have become complicated and unmanageable,
but true debt reduction is usually NOT a benefit of such a consolidation
loans, if used to consolidate bills, transform unsecured debt,
which is not backed by any collateral, into secured debt, which
is. Since most people use the family home as collateral, they
place the home at risk should they become unable to meet the
conditions of the consolidation loan agreement. If for any reason,
you fall behind on monthly payments or become unable to make
payments at all, the collateral asset may be taken by the lender.
interest rates associated with debt consolidation loans also
are often in the 20 to 25 percent range, comparable to high-interest
credit card rates, and therefore yield no advantage in reducing
monthly payments or total interest payments. The length of time
to repayment and total interest usually increase under such
a loan arrangement often taking 10 or 15 years or get out of
debt. Additionally, after finding themselves in dire financial
straits, many people have implemented a debt consolidation loan
only to run up further credit card debts and eventually completely
founder, being led into bankruptcy and losing everything.
consolidated debt plan is much different. If you qualify for
such a plan, you may restructure your debt with existing creditors
without transforming unsecured debt into secured debt. In fact,
secured debt such as a typical mortgage or automobile loan is
generally NOT included in a debt plan. Unsecured debts, usually
credit cards, student loans, bank lines of credit, medical bills,
department store credit cards and collection agency accounts,
are more typically the kinds of obligations considered for a
consolidated debt plan.
a consolidation plan, loans are NOT made and all existing creditors
remain the same. However, interest payments due creditors may
be re-negotiated, lowered or completely eliminated to allow
more principal to be paid to your debt each month.
fact, debtors may cut their monthly interest costs by as much
as half what it had been before the implementation of the consolidation
plan. This is the primary reason why someone pursuing quick
debt reduction may be able to get out of debt in only 3 to 5
years on average much preferable to the 10 or 15 years
a consolidation loan may have taken to pay off.
debt consolidation plan will allow you to manage your finances
without any additional loans and without declaring bankruptcy.
If you are having trouble meeting the minimum monthly payments
on your debts or you feel you are slipping further behind each
month, let the Debt Consolidation and Debt Management professionals
at Center for Credit Counseling Services go to work for you.