Debt Consolidation Company: Not a Quick Fix

2007-03-08 10:33:40

( Financial )



Taking out a new loan to close out old ones is the concept behind debt consolidation. To entice consumers to avail of debt consolidation, a debt consolidation company offers the market a service that gives consumers the option to pay either under a fixed-interest rate or a lower interest rate program.

SECURED LOAN

There are many aspects to a debt consolidation. Often, this program is in the form of a debt consolidation secured loan where all your multiple unsecured loans are paid off at one go by taking one debt consolidation secured loan.

A debt consolidation company can afford to offer lower interest rates primarily because taking a debt consolidation loan often requires the putting up of collateral or guarantee. Having collateral against a loan reduces the risk for any lending company which allows them to charge a reduced interest rate as well.

A debt consolidation company prefers secured loans, but it can also offer debt consolidation services under an unsecured loan. However, the terms for such will be entirely different. This is commonly found in credit card consolidation programs which are the most popular type of debt consolidation. Depending on the total outstanding debts that you have on your credit card, a debt consolidation company may deem you eligible for an unsecured loan or not.

NOT A CURE-ALL

While debt consolidation may be the solution to some people, it is not a cure-all for all your debt woes. Remember that a debt consolidation company is still a profit-making enterprise, and a debt consolidation company would not offer the service if it does not work to their advantage as well.

Taking one loan to pay another can be a vicious habit that is very difficult to get away from.
Ultimately, you have to address the root cause that got you into financial dire straits in the first place. No amount of debt consolidation can help you if the problem is your inability to control your spending habits.


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