DEBT CONSOLADATION: KNOW THE TERMS

2007-03-08 10:33:40

( Financial )



Tired of making various payments for different loans with varying terms and interest rates? Simplify your loan repayments through debt consoladation. Debt consoladation is the process of combining all your debt repayments into one lump sum payment every month. It is also done by accessing a new loan and using the proceeds to pay off numerous loans. It lets you prepare for only one loan payment every month compared with various loan payments for several loans.

Debt consoladation is attractive to loan payers for it offers simplification of loan payments. This is how advertisers catch the attention of people with outstanding loans to consider consolidating their loans as part of consumer debt management. Beware though of catchy lines from advertisers. Debt consolidation may not be the answer to your credit problems. It is important that you should know what happens when you consolidate your loans.

Impact on Finances

Debt consoladation could result to paying more money for over a longer period of time. You may end up more burdened even if you are only making one monthly loan payment. The lump sum monthly loan payment might not be conducive with your monthly cash flow. The new charges for the consolidation might also be higher.Also, there might still be added charges for the debt consolidation service provided.

When you consolidate your loans you are in the process of making your unsecured loans as secured. Secured loans are loans back up by a collateral. Thus, if you missed payments you are risking your property you put as security for your consolidated loans such as your house and lot. This is the reason why credit counseling services normally do not recommend debt consolidation.

Before you jump into the bandwagon of debt consoladation, make sure you refer to a professional to assist you in understanding whether debt consolidation will work for you in resolving your current credit problems. It might turn out that all you need is a debt counseling service to guide you on proper allocation of your finances to meet loan repayments.


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