Is Consolidation The Solution To Your Debt Trouble?
Is Consolidation The Solution To Your Debt Trouble
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Copyright (c) 2010 Suzy VanstrusenIn this article, let's discuss the different methods of debt consolidation and how you can tell if debt consolidation is the right solution for your debt problem.Different Methods of Consolidating DebtThere are two ways to consolidate debts - through a loan and in the course of a debt repayment program. The first option is by acquiring a loan which can be used to pay all debts in one lump sum payment. A debt consolidation loan is often a secured loan which means the borrower is expected to submit collateral to the lending company as guarantee for the loan. This is why borrowers are advised to take their debt consolidation loan payments seriously to avoid losing a property to the lender.Some lending companies may offer unsecured debt consolidation loans but these are often limited to a smaller value because of the lack of guarantee. The borrower may also be subjected to higher interest rate fees to make up for the risk involved in extending such a loan.A different way to consolidate debts is to join in a debt repayment program. This service is offered by a credit repair agency or debt consolidation company. Once enrolled in the program, the borrower will submit payments to the agency, who in turn, will distribute payments to corresponding creditors. This arrangement may be advisable for people who are having trouble managing their payment due dates.If you are primarily dealing with credit card debt, one way to consolidate is to get a credit card with zero introductory rate. By transferring balances to the zero APR card, you can significantly reduce your monthly payments by not paying interest rate fees and you can focus on paying the original amount of debt you owe.Is Debt Consolidation the Answer?Remember that not all agencies offering debt consolidation loans or debt consolidation programs are legitimate. Still, so-called "non-profit" organizations may disguise as non-profit but in actuality are only after making money from unwary customers.Plan your repayment ahead of time to make sure that you will not fall behind your schedule of payments with your consolidation loan or debt consolidation program. Do not forget that consolidation is only the first step to recover from debt problems. The accomplishment of debt consolidation will still depend on how you will be able to keep up with your payment commitments.Lastly, people who desire to seek debt consolidation must be very careful so as not to get into new debts despite the fact that working on debt repayment. Some consumers who challenged to consolidate their debts initiate themselves trapped in a more serious dilemma because they failed to keep away from new debts while in the middle of repayment.Successful debt consolidation lies on three important factors - finding a trusted debt consolidation company, in harmony with your debt consolidation expenses and by evading new debts as you work towards debt freedom.
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