Many Americans are currently in a daily struggle with their debt. If you're one of them, sick and tired of late payments, multiple outstanding loans, possible wage garnishment and constant phone calls from persistent bill collectors, you're no doubt searching for a viable solution. Consolidation loans may be able to help you.
Remember this before you proceed: a consolidation loan is another loan. What happens is this: your lender buys up your debt and bundles it into one loan, presenting you with one bill to pay each month instead of the several that you have been paying. Many Americans have found this to help lighten the load of debt on their shoulders.
The are a lot of factors that lend to debt consolidation's attractiveness. For starters, when loan payments are owed to multiple sources, it can be difficult to keep track of due dates. One due date can be missed while you're focusing on paying the balance on another, and the dates can fall between paychecks, making it hard for you to make ends meet.
Consolidation loans are not a cure-all for these issues. Although your lender may be able to buy out your debt at a good price, there's a good chance they'll have to turn it around to you at a higher interest rate. This will depend on your credit history. In other cases, it may be a higher interest rate, but it's only interest on one payment instead of several. Regardless, there is a price for the convenience of only having one bill.
A consolidation loan can negatively affect your credit score, in some cases. Credit bureaus examine multiple factors when they're looking at your credit, and consolidation loans will show up in that examination. You have to be careful about closing your accounts after setting up your consolidation loan, otherwise it will appear you just took on double what you were originally in debt for. Once you've done damage to your credit score, it's a long hard road to get it back into shape.
When foreclosure and bankruptcy look imminent, it's a good time to think about consolidation loans. Be careful to examine all of your available options before diving into a loan though. Don't pay for the convenience if there's a way for you to handle it yourself. If you're wallowing, however, consolidate as soon as you can.
If you do choose the debt consolidation loan route, make sure to treat it as the clean slate that it is. Don't fall back into a pattern of poor payment habits. Do your best to pay on time, and pay as much as you can. This reflects well on your credit score.
If you can manage your debt outside of consolidation loans, do so. They're a great option for those that really need to take advantage of them, but otherwise it's better to try to shoulder it on your own.
Remember this before you proceed: a consolidation loan is another loan. What happens is this: your lender buys up your debt and bundles it into one loan, presenting you with one bill to pay each month instead of the several that you have been paying. Many Americans have found this to help lighten the load of debt on their shoulders.
The are a lot of factors that lend to debt consolidation's attractiveness. For starters, when loan payments are owed to multiple sources, it can be difficult to keep track of due dates. One due date can be missed while you're focusing on paying the balance on another, and the dates can fall between paychecks, making it hard for you to make ends meet.
Consolidation loans are not a cure-all for these issues. Although your lender may be able to buy out your debt at a good price, there's a good chance they'll have to turn it around to you at a higher interest rate. This will depend on your credit history. In other cases, it may be a higher interest rate, but it's only interest on one payment instead of several. Regardless, there is a price for the convenience of only having one bill.
A consolidation loan can negatively affect your credit score, in some cases. Credit bureaus examine multiple factors when they're looking at your credit, and consolidation loans will show up in that examination. You have to be careful about closing your accounts after setting up your consolidation loan, otherwise it will appear you just took on double what you were originally in debt for. Once you've done damage to your credit score, it's a long hard road to get it back into shape.
When foreclosure and bankruptcy look imminent, it's a good time to think about consolidation loans. Be careful to examine all of your available options before diving into a loan though. Don't pay for the convenience if there's a way for you to handle it yourself. If you're wallowing, however, consolidate as soon as you can.
If you do choose the debt consolidation loan route, make sure to treat it as the clean slate that it is. Don't fall back into a pattern of poor payment habits. Do your best to pay on time, and pay as much as you can. This reflects well on your credit score.
If you can manage your debt outside of consolidation loans, do so. They're a great option for those that really need to take advantage of them, but otherwise it's better to try to shoulder it on your own.
About the Author:
I'm a wealth managment practitioner specializing in debt consolidation loans. For more resources and information, check out Churchwood Debt Management Solutions.
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