Will Debt Consolidation Help Me?
In the present bad economy many people are one paycheck from disaster and larger groups than we would like to believe are relying heavily on their credit cards to make ends meet.
If a person just pays the minimum amount acceptable to the credit card company for his or her account, it will take years to ever pay the card off, maybe even decades.
When the government mandated that credit card statements reflected that fact and suggested what making more than the minimum would do towards paying off the credit card debt that was a great service to the American credit-card-carrying public.
It startled many people.
Some began asking the question, will debt consolidation help me? As with most questions about credit, the answer is yes and no.
Technically speaking, a debt consolidation loan would allow you to take out one loan to pay multiple others.
If the rate is low enough then this may well be a good opportunity to get out of debt, and hopefully to stay out of debt thereafter.
It could help you to avoid bankruptcy and collections agencies.
Staving off judgements is another possible advantage of debt consolidation.
Those would be the up-sides of the process and why it is of interest to consumers facing large credit card debt with limited resources to keep making payments.
And again, paying only the bare minimum only lengthens the length of time one would pay on an account before paying it off.
Often the minimum is only addressing the interest on the account and the principle continues to exist untouched.
Debt consolidation, however, must be entered into with caution.
Read with care the terms of the agreements and the interest rate.
Do not allow an unscrupulous agency to promise that the interest rate will drop after the first payment.
Again, peruse thoroughly the contract they want you to sign.
If that alleged fall in interest is not in writing, they are lying.
Even if you complain, it is a he said, she said conversation and you will, unfortunately not win.
Financial advisors like Dave Ramsey call debt consolidation "a dangerous way to get out of debt".
Calculate the longer time offered to pay back your loan at the interest rate quoted to you and you will usually find that you are in the long run paying more than the original debt! Unless there is a firm plan to limit spending to cash-only, studies show 78% of debt consolidators go back into debt.
Decide for yourself whether debt consolidation is for you, but tread carefully!
If a person just pays the minimum amount acceptable to the credit card company for his or her account, it will take years to ever pay the card off, maybe even decades.
When the government mandated that credit card statements reflected that fact and suggested what making more than the minimum would do towards paying off the credit card debt that was a great service to the American credit-card-carrying public.
It startled many people.
Some began asking the question, will debt consolidation help me? As with most questions about credit, the answer is yes and no.
Technically speaking, a debt consolidation loan would allow you to take out one loan to pay multiple others.
If the rate is low enough then this may well be a good opportunity to get out of debt, and hopefully to stay out of debt thereafter.
It could help you to avoid bankruptcy and collections agencies.
Staving off judgements is another possible advantage of debt consolidation.
Those would be the up-sides of the process and why it is of interest to consumers facing large credit card debt with limited resources to keep making payments.
And again, paying only the bare minimum only lengthens the length of time one would pay on an account before paying it off.
Often the minimum is only addressing the interest on the account and the principle continues to exist untouched.
Debt consolidation, however, must be entered into with caution.
Read with care the terms of the agreements and the interest rate.
Do not allow an unscrupulous agency to promise that the interest rate will drop after the first payment.
Again, peruse thoroughly the contract they want you to sign.
If that alleged fall in interest is not in writing, they are lying.
Even if you complain, it is a he said, she said conversation and you will, unfortunately not win.
Financial advisors like Dave Ramsey call debt consolidation "a dangerous way to get out of debt".
Calculate the longer time offered to pay back your loan at the interest rate quoted to you and you will usually find that you are in the long run paying more than the original debt! Unless there is a firm plan to limit spending to cash-only, studies show 78% of debt consolidators go back into debt.
Decide for yourself whether debt consolidation is for you, but tread carefully!
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