Month: February 2018

Many people find that over time they have accumulated more debt than they can repay. When that happens, there is a reinforcing downward spiral. The inability to repay the debt leads to additional interest charges and penalties, making it still harder to repay the amount owed.

One common suggestion for breaking this vicious circle is to employ debt consolidation. For thousands, this has seemed like the way out, the way back to financial health. But there are pros and cons to debt consolidation, no matter what form it takes. Being aware of those will help you decide if it is the salvation in your particular circumstances.
First, what is ‘debt consolidation’? At base, it’s a simple proposition. Gather all your multiple sources of debt into one debt and make a single payment every month to a single debtor.

But for that to be helpful several things have to take place at once. After all, whether you pay $150 + $50 + $25 to three debtors or $225 to another it’s the same amount. With online bill payment it isn’t even necessary these days to make out three checks. You aren’t even saving on postage stamps!

In order for debt consolidation to be useful one or more of the following has to occur: (1) either the total monthly payment has to decrease , or, (2) the net amount of interest has to decrease, or, (3) the actual total debt has to go down as a result of consolidation. Which, if any, of these take place depends on the specific debt consolidation plan you have planned.
In the ideal case, which rarely happens, all three take place. The most common scenario is that the monthly payment is lowered. This has several advantages to the debt ridden. When the payment is lowered, you have a much higher chance of being able to pay it consistently.
That helps prevent piling more debt (interest and late charges) onto existing debt. You also have a much more relaxed frame of mind, knowing you can meet the monthly debt obligation without sacrificing other needed items.

The risk is that if the payment is too low, some of the psychological factors that led to excessive debt in the first place can rise again. Thinking you have lots to spare can cause you to relax too much too soon. Continual worry is not healthy, commitment and concern are – if your goal is to become debt free.

Unfortunately, many plans lower that payment by extending the life of the loan long enough to cover paying off the entire original amount owed. That leads to more interest paid over the long term. That’s fair to the lender, since you do owe the money. But some will settle for less if they have good reason to believe they will actually get repaid. Try to negotiate a lower settlement, then consistently make the agreed on payments every month.

Losing debt is like losing weight. Consistency, and a commitment to lower it, and keep it lowered, is the key to long-term success.

Debt consolidation is a solution offered to many people these days with explaining some real weird theories about it and it I leading to creation of more and more myths about it. Here well consider this debt consolidation in a simpler one and try to clear out whatever confusions arise in your mind. But first of all lets see what credit consolidation is and how you may get benefit from this. It is simply paying many smaller loans by having a larger one with some collaterals and lesser interest rate.

The points to be discussed about this debt consolidation are:

1.It is for those who are unable to manage their money matters and who are not good financial planners. Those who are capable of saving and paying off money successfully should avoid this and it may not prove beneficial to them.
2.It is nowhere equivalent to bankruptcy or settlement because in this way you are not either having the title of a bad payer or negotiating with the original creditors about some relaxation in your debt conditions.
3.It is a compulsion for you to be a home owner to have secured debt consolidation. The profitable consolidation only results after offering something as collateral and you cant do this unless you own your own real estate property of some great value.
4.It would never deteriorate your credit report or credit score but on other hand may prove helpful in improving this. As you are actually paying many small debts so your credit score may get improved in some cases.
5.It is not a tactic to reduce your debt but it is just a method of incorporating all of your debts into a single and a huge one. It doesnt mean at any point that debt on you is lessened.
6.debt consolidation companies are actually not required in this whole process if you have the knowledge and you can negotiate well with the creditor you can do it on your own in much successful manner.
7.You may require the help of a finance lawyer or an outsider help for the whole legislator and documentation portion of the deal. Because it contain many minute points to be handled.
8.yes, a drawback of this debt consolidation is the difficulty in getting future loans that somewhere resembles bankruptcy but remember by paying the monthly amounts regularly and improving your credit score you can overcome this handicap.
9.You may get into a digging well of having more and more debts in your life and end up in many unpaid debts that will allow the creditors to sale your valuables. So try to handle it with much more caution and financial wisdom.
10.It is just like receiving from one person and paying the other one but you receive with a lesser interest rate that is the profit point.
11.You wont be getting many payments calls daily for those small loans but yeah if you actually fail to pay this one you are at least going to receive one call.
12.It doesnt allow you to write a debt note unlike in bankruptcy.