| Debt Consolidation | | | | payment and has damaged their credit report and |
| This is a debt management strategy that swaps | | | | credit score. It is common knowledge that any bank |
| several small consumer debts with one large | | | | or financial institution willing to lend many thousands |
| consolidation loan. This financial strategy is mostly | | | | of dollars to someone considered a credit risk for the |
| used in an effort to achieve a lower interest rate in | | | | purpose of paying off other debts will not do so |
| addition to perhaps a fixed interest rate on debt with | | | | unless the new loan is issued at a much higher |
| variable and ever increasing interest costs. | | | | interest rate than what the debtor is probably |
| | | | already paying. |
| Supporters of debts consolidation stress the | | | | Is Self-Service Just As Effective For Much Less? |
| advantage of eliminating or reducing considerably | | | | Should someone pay for a service that most people |
| accrued interest and penalty charges that are owed | | | | could accomplish on their own, without needing to |
| as well as consolidating payments of all outstanding | | | | seek a lot of help? Many debt consolidation and credit |
| consumer debts to one single monthly payment. | | | | counseling firms promise to handle the whole |
| Another advantage is that credit counselors can | | | | consolidation process for their clients. Even if it seems |
| frequently negotiate much lower interest rates. This | | | | somewhat difficult to read credit reports, understand |
| has the potential of paying for their counseling fees | | | | credit scores then take the time to make the |
| with future interest cost savings. Other potential | | | | required phone calls for the purpose of negotiating |
| benefits of consolidating debt can include steering | | | | better interest rates and lower payments with |
| clear of bankruptcy, putting an end to upsetting | | | | existing creditors, doing this in many cases is much |
| collection calls and escaping harsh late fees. | | | | better than paying a fee of ten percent of the total |
| The Disadvantages | | | | debt for someone else to do it. |
| Nevertheless, debt consolidation can be somewhat | | | | From Bad to Worse |
| hazardous and is not an uncomplicated, painless | | | | When debtors enter into a contract with a debt |
| solution for each and every debt problem. Once all of | | | | consolidator they need to make sure that the firm |
| the outstanding debt is paid-off by the new | | | | they hired is trustworthy, with sufficient references |
| consolidation loan the debtor still owes all of the debt. | | | | and will commit to some type of acceptable |
| It's just that the debt has been refinanced to a | | | | guarantee. A customer should never have to |
| longer repayment period. The principle amount the | | | | abandon a relationship with a debt consolidation |
| debtor owes has not decreased or mysteriously | | | | company having a lower credit score than when they |
| gone away. When advertisements for debt | | | | engaged them. Having a good grip on the total |
| consolidation programs promise to eliminate debt, | | | | amount of debt due and how long it will reasonably |
| they mean paying it off slowly over several years | | | | take to pay it off is essential. This is so because |
| with a lower debt payment. Many times the promise | | | | when a sales agent from a debt consolidation firm |
| of consolidating debt is too tempting and | | | | makes a case that it could take thirty-five years to |
| unfortunately some people believe that it will buy | | | | pay the debt off and you are sure that it would only |
| some kind of amazing financial witch craft that will | | | | take ten years this can be used as a good test to |
| shrink piles of debt from many thousands of dollars | | | | assess how honest they are in dealing with you. |
| to a few hundred dollars instantly. Exaggerated claims | | | | The First Thing to Do |
| like these can be found in many ads on the internet | | | | Whether or not consolidating debt into one payment |
| and elsewhere. | | | | makes sense or not the first step in debt |
| If The Key is Lowering Interest Rates - Is It Always | | | | management self-help is to chop up and discard credit |
| Possible? | | | | and charge cards. If using them irresponsibly is the |
| When a debtor needs debt consolidation he or she | | | | root cause of financial problems then continuing to |
| probably already is in arrears on at least one monthly | | | | use them will only cause a deeper financial chasm. |