subject: Is Consolidation The Solution To Your Debt Trouble? [print this page] Paying off debts can be an overwhelming task especially when dealing with different creditors. Typically, consolidating debts is advised to simplify the debt repayment. In 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 Debt
There 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.
Another way to consolidate debts is to enroll in a debt repayment program. This service is offered by a credit repair agency or debt consolidation company. Once registered in the program, the borrower will present payments to the agency, who in turn, will hand out 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 transporting balances to the zero APR card, you can significantly lessen your monthly payments by not paying interest rate fees and you can center on paying the original quantity 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 success of debt consolidation will still depend on how you will be able to keep up with your payment obligations.
Finally, people who want to seek debt consolidation need to be very careful so as not to get into new debts while working on debt repayment. Some consumers who attempted to consolidate their debts found themselves stuck in a more serious problem because they failed to avoid new debts while in the middle of repayment.
Successful debt consolidation lies on three important factors - finding a trusted debt consolidation company, keeping up with your debt consolidation payments and by avoiding new debts as you work towards debt freedom.
Copyright (c) 2010 Suzy Vanstrusen
by: Suzy Vanstrusen
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