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Article Series: Debt Relief & Debt Consolidation
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Debt Consolidation
Debt consolidation is a concept that most
people are aware of and often is a good idea. Basically when
consolidating your bills or loans, you combine the total amount
owed and make a single monthly payment instead of many smaller
payments through out the month. While this is often a good
solution to debt problems, there are a few things that need
to be considered first.
The first thing to consider is if a consolidation loan is
in your best interest. Regardless of how you end up procuring
a consolidation loan the basic facts are the same, you are
borrowing more than you currently owe to get one monthly payment.
Is this convenience worth the extra cost of the fees and interest
on a loan for money than you currently owe?
Depending upon your situation there may be several courses
of action to consider first. Step one is to take a serious
look at you personal budgeting. Do you need to make changes
to how you are currently spending your income? If there is
too much debt to be repaid at once can you enter into a payment
arrangement with your creditors to allow you the time that
you need to get ahead?
If you are not able to work your way out of your current situation
then you need to look at other borrowing solutions. The first
option should be to examine what possibilities you already
have. Do you have a mortgage?
If you have a mortgage there may be a few options available
to you. First you may be able to increase the amount of your
current mortgage. In order to increase the amount of your current
mortgage you may have to switch lending institutions and basically
re-mortgage your home while other places will simply add the
extra amount to your current mortgage. The other similar option
you have is to take out a second mortgage on your home. In
this case you are borrowing against the equity in your home
that you have already built up.
If you do not have a home but do have good credit then you
may have other options available to you such as an unsecured
loan. An unsecured loan is a good faith loan meaning that the
business that lent to you trusts you enough to repay the loan.
This type of loan will not impede your ability to buy and sell
property since they will not but a lien on your assets. This
may be important to you if you are planning on selling your
vehicle or other assets in the near future.
Debt consolidation can be a valuable tool if you know what
you are doing and how you got to this point. Debt consolidation
may offer lower interest rates, lower monthly payments and
only a single bill to pay once a month thus making your budgeting
easier.
However, the cost of this convenience can be fairly high.
Often companies will charge you for settling a loan earlier
than arranged thus adding to the total amount owed. Generally
consolidated loans payments are less than what you are currently
paying. This is because the term is longer than before. Another
way lenders make money is by offering loan insurance that you
may already have. It always pays to shop around for any product
since the company offering it at the time is usually charging
more for the convenience of bundling it.
As you can see a consolidated loan can save you money but
may not be the best option available to you. The key is to
shop around and do your homework. Find out what various companies
offer, what kind of interest rate you should expect to pay
based upon your credit rating and what alternative options
you have available to you. For example you may be able to borrow
from your 401K plan and you will not be charged interest on
the loan if you make an arrangement to repay the loan with
your employer. A 0% interest loan is a much better option than
a consolidated loan.
Click here to discover my current SolveYourProblem recommendation and choice pick for the fastest, easiest and best debt relief solution you'll find anywhere. Get it and reward yourself with more cash in your pocket.
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Jakob
Jelling is the founder of http://www.cashbazar.com.
Visit his website for the latest on personal finance, debt
elimination, budgeting, credit cards and real estate.
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