Should you take advantage of unsecured debt consolidation?

2007-03-08 10:33:40

( Financial )



A lot of Americans have unsecured debts. There are two kinds of debts. Unsecured debts are not tied to any collateral. Examples of these are credit card and student loans. Secured debts are tied to a collateral. If you fail to make payments on these kinds of loans, the creditor has the right to repossess the property tied to the loan.

Credit cards actually provide you an unsecured line of credit. This means that the amount you owe these firms are not tied up to a lien and once you actually default on these loans, they can't collect anything. Should you find yourself in a bind and realize that you have a lot of unsecured credit card debts, you might want to try getting into an unsecured debt consolidation program. With this program, all your unsecured debts are consolidated into just one loan so you only need to make one monthly payment instead of paying off your creditors individually. A lot of companies provide this service. They'll deal with your creditors and you just make one payment per month with them.

If your unsecured debts are due to students loans, you can also get a bad credit unsecured loan. You only need to pay for the interest per month and you can start paying off the principal even 6 months after graduation. This ensures that you have enough time to gain employment and pay them back.

It is important to note though that while getting into an unsecured debt consolidation program will help you with your finances at present, it will take you longer to pay off your debt which will eventually translate into you paying more in interest payments. You also have to avoid the trap of getting into more debt.

Actually, it is also to the unsecured creditors' benefit that they make repayment easy for you. They know that if you file for bankruptcy that they're the last on the list of creditors to be paid. It really is a win-win situation if they provide you options and help you cope up with your debt.

So, should you take advantage of unsecured debt consolidation? It really is up to you. Just weigh the pros and cons and then decide. Ultimately, the decision is up to you.


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