What Does It Mean To Consolidate Your Debt?
Consolidating your debt means pulling all your outstanding debt together and turning it into one debt. One loan will be made to pay off all other debt and you will have one debt, one interest rate and one monthly payment.
Debt consolidation wipes out your many different credit accounts which stops any calls regarding late or missed payments. You no longer have to be concerned with accounts that are in default or mounting interest. You now only have to be concerned with keeping one account current.
Debt consolidation may sound like a great idea but you need to be careful when making the decision. Some debt consolidation programs can come at a pretty high price, so high that they may cost you money rather than help you save it. So you need to look at a consolidation offer carefully before making a decision.
This negotiation comes at a price, and you need to do some research before engaging such a firm. This is because some firms charge very high amounts as service fees, a fact which a debt-pressed individual often fails to take into account. You must remember that if the firm saves you more money than it charges you, then it is a good deal.
The second way to consolidate your debt is to opt for balance transfer, especially when you have multiple credit card debts. All that you need to do is to transfer the high interest loans to a card that charges the lowest interest. This reduces your interest liability significantly.
A consolidation loan that will take care of all the outstanding debt you have will most likely have to be a secured loan. Because the lender is taking a lower risk your interest rate will be better. However, the assets your use to secure the loan will be at risk, so this is something to consider seriously. You want to be sure that you can make the payments on this loan and that there is no danger that you may default on the loan.
To a debt-ridden person all debt-consolidation options appear attractive because they all promise the same thing: freedom. However, before diving headlong into the process, you must weigh the pros and cons of any deal that is being offered. You must compare the consultancy fees and the interest rates being offered by different vendors. Also, check out the tenure period, and your ability to repay the monthly amount.
Consolidating your debt is an important part of managing your debt. Of equal importance is making the payments that result from your consolidation.
Debt consolidation wipes out your many different credit accounts which stops any calls regarding late or missed payments. You no longer have to be concerned with accounts that are in default or mounting interest. You now only have to be concerned with keeping one account current.
Debt consolidation may sound like a great idea but you need to be careful when making the decision. Some debt consolidation programs can come at a pretty high price, so high that they may cost you money rather than help you save it. So you need to look at a consolidation offer carefully before making a decision.
This negotiation comes at a price, and you need to do some research before engaging such a firm. This is because some firms charge very high amounts as service fees, a fact which a debt-pressed individual often fails to take into account. You must remember that if the firm saves you more money than it charges you, then it is a good deal.
The second way to consolidate your debt is to opt for balance transfer, especially when you have multiple credit card debts. All that you need to do is to transfer the high interest loans to a card that charges the lowest interest. This reduces your interest liability significantly.
A consolidation loan that will take care of all the outstanding debt you have will most likely have to be a secured loan. Because the lender is taking a lower risk your interest rate will be better. However, the assets your use to secure the loan will be at risk, so this is something to consider seriously. You want to be sure that you can make the payments on this loan and that there is no danger that you may default on the loan.
To a debt-ridden person all debt-consolidation options appear attractive because they all promise the same thing: freedom. However, before diving headlong into the process, you must weigh the pros and cons of any deal that is being offered. You must compare the consultancy fees and the interest rates being offered by different vendors. Also, check out the tenure period, and your ability to repay the monthly amount.
Consolidating your debt is an important part of managing your debt. Of equal importance is making the payments that result from your consolidation.
About the Author:
Before you sign up for a consolidation service, you need to know what is debt consolidation really going to cost. Find out why it's often not a good idea on the Debtopedia website. Visit http://www.debtopedia.com for more tips and advice and to get a free copy of my 5 day e-course "Operation Money-Find: How To Find Money To Start Paying Off Your Debt This Month"