Things To Consider About Debt Consolidation
Signing up for debt consolidation does not reduce the amount owed. Instead, individuals will be paying a single new creditor a predetermined amount each month.
This new method of repayment has its
-Lower interest rate. This depends on collateral and the total amount of your debt. Ultimately, one could end up with a lower interest rate than they were paying before.
-One bill, one creditor. Debt consolidation simplifies the hassle of multiple bills.
-Simplifies large debt. When debts are boiled down to one creditor and one payment, it is considerably easier to keep track of and budget for the monthly bill.
Debt consolidation utilizes other creditors to pay off debt. The riskiest aspect of this is that debt goes from being an unsecured debt to a secured one. Essentially, personal assets are put up as collateral for the in order to receive low monthly payments. But this also means creditors can seize personal property if a monthly payment is missed.
Debt consolidation incurs a lower monthly bill and may have a lower interest rate than your original debt. However, individuals are still responsible for repaying the total original amount of the loan plus interest. Also keep in mind that since this loan is now a secured loan, this balance cannot be lowered.
Determining What Is Best for You:
Debt consolidation is best for those with at least $8,000 of debt or more. Collateral-based loans are backed by the property one owns, including a home and or a vehicle. If it is not certain whether the monthly obligation can be paid, other options should be explored.
If there is no collateral, one could get an unsecured loan. However, this interest rate will be much higher because the lender has nothing other than a promise to repay. The higher rate in addition to the original debt can end up costing much more in the end.
If monthly payments can be met and paid, debt consolidation can be very beneficial. But those struggling to make ends meet might consider some alternatives, if they fall behind with debt consolidation loan now they could also lose their personal assets. If this describes your situation, some alternative options would be Debt Management also known as Consumer Credit Counseling or even Debt Settlement.
Give us a call, so we can help review your options and point you in the right direction.