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Debt Consilidation |
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Debt consilidation simplifies your monthly bill paying process. Instead of paying multiple bills, you will pay the debt consilidation service one payment per month.Debt Consolidation is a process in which multiple debts (credit cards and loans) are consolidated (or condensed) into one larger loan.Debt consolidation allows you to: 1. Organize all of your credit/loan payments into one monthly bill 2. Lower your monthly payments, sometimes drastically 3. Pay off your debts in a shorter amount of time - sometimes Overall, debt consolidation can usually be a good thing; however, if you have bad credit or you are working with a bad company, you may end up paying more per month than if you paid off your debts individually, because you could end up with a very high interest rate. A debt consilidation loan is often secured by home equity or other collateral. A secured debt consilidation loan exchanges your unsecured debt for secured debt. A debt consilidation loan is typically spread over a 15 - 30 year period, leaving you open to lose collateral over this period. If you run into further difficulty in the future you stand to lose the collateral that secured the debt consilidation loan - often your home. Credit card debt consilidation loans are often unsecured, meaning there is less that a creditor can do should you fall behind on payments. Another option is a debt consilidation services enable your debts to consolidate into one monthly payment. While using debt consilidation services, you'll pay the debt consilidation service a fee as well as your total payment each month. The debt consilidation services then disburses the payment to your creditors. Normally debt consilidation services have pre-negotiated interest rates with your creditors. If the rate is lower than yours, your rate will be reduced. However, if the debt consilidation services negotiated rate is higher than yours, your rates may actually increase. Lastly, you are relying on a third party to make your payments for you. If the debt consilidation service is late or makes the incorrect payment, you will be penalized. Hence, before you do anything to consolidate your debt, remember to do the math. Organize all of your payments and do the math, then look at your options and weigh your current monthly payments against your future monthly payments, then consider how long it will take to pay off the debts. Ultimately the final decision is up to you. Debt Consolidation can be a lifesaver, but make sure you know what you’re getting into before you sign the dotted line. |
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