Advantages And Disadvantages Of Debt Consolidation Programs For Bad Credit

It is tiresome to handle multiple debts

It is tiresome to handle multiple debts. If you want to get rid of all these credit debt mess, debt consolidation is the best solution. There are many lending institutes and debt consolidation service providers, who provide its applicants with debt consolidation loans.

Advantages of debt consolidation:

1.With debt consolidation program, you will have to handle one payment every month rather than dealing with multiple payments every month.

2.A suitable debt consolidation loan can help you in availing a reduced interest rate. With little bit of study and survey, you can get the most affordable interest rate.

3.You will have to pay less compared to what you had as outstanding dues.

4.You can avoid bothersome calls from your creditors or the collection agencies.

5.You can improve upon your credit score if you take a debt consolidation loan.

6.With the internet application facility, there is a huge rise of competition in the lenders. Lenders have even started giving school loan consolidation.

Disadvantages and risks involved in debt consolidation:

1.It is a misconception that debt consolidation loan program completely eliminates the debt. It is just a provision by which you can avail lower interest rates and longer repayment period.

2.There is a huge risk to your home equity if you are not able to pay back your debt consolidation loan in a regularly and timely. Secured debt consolidation loan is opted by many people as the interest rate is generally much lower than an unsecured debt consolidation loan. But if you are not able to pay you will lose your property.

3.You can end up adding even more debt in addition to your current monthly payments along with your debt consolidation loan monthly repayment. It is very tempting and one can slide back into past habits and again start using the credit cards because of the available credit.

4.If you are a bad credit holder you will have to pay a high interest rate on your debt consolidation loan which can be actually more than the current amount you pay as a monthly installment as a result you will have to pay more and that to for longer period.

5.Again there is risk of fraud debt consolidation service providers. In the name of quality and surety they can do anything and fall up to any extent to attract debt consolidate applicants. They may use marketing tactics like, they may provide free debt consolidation quote.

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Precautionary measures:

As a potential applicant of the non profit debt consolidation program, you should do a good market research of the lending institutes offering such debt consolidation program; know the current market trends and interest rates. You should ask for and compare different debt consolidation quotes from different lenders.

by: vanessa

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