What Is Debt Consolidation 456723414134087

For consumers who have let their debt get out of their control, larger questions about debt and bankruptcy loom. These questions are hard to answer and even harder to face for many consumers, who are left trapped in the cycle, wondering where they can go except down in their continuing spiral of debt. The first step toward a solution, though, is simply asking ' what is debt consolidation ?'

Debt consolidation is the process of bringing your debts under the umbrella of a single loan to help you make payments more easily and to help you reduce your monthly payments as well as your potential interest rate. This can be done through the use of a new loan, or you can turn to a debt consolidation company to help you if you have a poor credit score, and you lack the means for a new loan.

Debt Consolidation Company or Debt Consolidation Loan?

A debtor who turns to a consolidation company is actually not making the best choice. Instead, it is much wiser to consider contacting the companies involved to explain your financial situation, and that you are considering bankruptcy, if that is true. Ask them to help you make your payments to them by lowering interest rates and possibly by waiving fees. Your credit card company would rather get back slightly less in interest than no money at all, and they will usually work with you.

You can also get a loan with or without collateral, which includes a home equity loan, a loan against your car, or a personal unsecured loan. Look specifically for a loan with a fixed rate to prevent problems as interest rates rise. You can also try turning to the government for a federal debt consolidation loan if you qualify. Find out by checking online.

What is Debt Consolidation? It allows you to roll all of your debts into one (a consolidation loan) and you now only need to make one payment each month.

It has now become commonplace to think that a debt consolidation loan is the right step forward due to a lot of television advertising that now takes place. The TV adverts simply use a known trusted celebrity to endorse their product, such as Carol Vorderman.

The viewer thinks, "Well, if Carol Vorderman recommends the product and she is good with numbers, then this must be the best solution."

- Not necessarily

One thing you may miss when watching the television adverts is the small print, "only homeowners need apply"

What most people do not realise is that these tend to be secured loans, which means that it is secured against your home. If you fail to keep up payments with the loan then you will lose your home.

Why Do People Recommend A Debt Consolidation Loan?

The main reason given is to simplify the payments to all of your creditors with one payment per month. Also, you may find that the debt loan has a lower interest rate than for instance your credit cards. So, people recommend that you pay off all of your credit cards with a loan because you will not be paying as much interest.

Debt Consolidation Loans Lead To Deep Debt

However, even though a loan can have a lower interest rate than your credit cards, think about this, most people who use this method, will clear their credit cards, take out a secured consolidation loan and will begin paying one monthly payment. How much willpower do you think is needed to not spend any money in your now removed credit cards? - Best of luck - the willpower necessary for this really is massive!

This kind of loan (based on credit action) leads three in five people into further debt.

What most people do not realise as they get deeper and deeper into debt is that their homes are in risk if they do not keep up repayments on the secured loan. On average, an individual who has removed their credit card debts and taken a consolidation loan will start spending cash again on their credit cards and rack up more and more debt, which eventually leads to the problem of not being able to keep up the payments on the loan and eventually leads to the lack of their house.

If you have credit card debts, keep in mind that they are unsecured debts, so you can't lose your home from not paying your credit card debts, so even though you can potentially conserve money by paying off your credit cards utilizing a consolidation loan, the danger is a lot higher as you could potentially get deeper and deeper into debt and also lose your home.

If you have debts and you are worrying how exactly to clear them, the initial step you should take is to acquire some qualified advice and not take a debt loan. You might be amazed at the possibilities to you.