Consolidation Credit Debt

Getting out of debt is tough work

Getting out of debt is tough work. It can be a long and arduous process, and for the consumer who is trying to decide what direction to take to do it, it can be full of misinformation. There are many kinds of debt relief, and knowing the difference between them all can help make a more intelligent decision.

Consolidating bills through consolidation loans has been a very popular means of reducing debt in recent years, but it is also an option which isn't as economically healthy as it seems. The consolidation of credit debt entails trading unsecured debt - like credit card bills, department store card charges and local accounts - for a secured debt. Consolidation credit debt means taking out a large loan to pay off all of the bills, and in order to get one, the consumer must put up collateral. This generally means a home, real estate property or other expensive items. Since most consumers already have a mortgage, it means a second mortgage or a home equity loan. And that can be a dangerous financial place to be in.

The future of the economy is full of uncertainties and added to personal ones like job loss, divorce or illness, betting that there will be ample income for years to come to pay off consolidated credit debt is risky business. When people consider that their home is the last thing that they have, and they lose it due to a default in loan payments, there's very little recourse. So the consolidated loan that seemed good at the time, becomes one big financial albatross.

Getting out of debt means just that. It doesn't mean just rearranging it and making it seem different. And that's what consolidation credit debt is. It is not only just making the debt seem new and maybe more affordable for monthly payments, it is a long term obligation with severe penalties for default. Consumers today have more options than consolidation credit debt or bankruptcy. There are methods like debt management and debt settlement, which work in entirely different ways. While dependent upon circumstances, they work at reducing the overall debt's principle for starters. No loan is required to start making lower monthly payments at reduced interest rates, and the average consumer finds themselves out of debt in between twelve and thirty-six months. There is no collateral and the debt remains unsecured.

In many ways, consolidated credit debt is an old-fashioned idea. It still makes perfect financial sense for lenders, who are making the loans. They make a profit and they have collateral backing up the loan. It is for the borrower that they hold so much danger.

by: Vicki Hall

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