, you most likely have made the decision to pay off your debt and begin living a life without debt. This may take several years, but it will be a great relief when you attain your goal. In years past, the traditional debt consolidation method was a debt consolidation loan, but financial experts have come to realize that there are better ways of paying off your debt than through the use of a loan. Here are 3 reasons that you should consider an alternative method of debt consolidation.
1. The majority of debt consolidation loans use your home as collateral. This means that if you are not able to make your payments, you could be facing foreclosure and lose your home. Debt consolidation loans that require only a signature and no collateral will have higher interest rates and will require an above average credit score. Any loan is going to require you to be credit worthy.
2. Using a loan to get out of debt is just moving the debt from one place to the other and is not really addressing the problem. Financing debt with debt is not a good idea and it does not address the real problem. There are many people that go through a continuous cycle of eating up the equity in their home with credit card debt. It is important to keep the equity in your home available. You never know what you might need it for.
3. Research shows that most people that consolidate debt with a loan will have credit card debt again within a year. Once the credit card balances have been paid off by the loan, the credit cards have no balance and a lot of available credit. And this available credit is tempting and is soon used again. Now, you have a credit card payment and a loan payment.
Credit card debt can be very damaging in many ways, but a debt consolidation loan is not in your best interest. If you have debt and want to consolidate it, a nonprofit credit counseling agency is a great resource for consolidating your debt without a loan. You will only be making one payment each month to the debt counseling company and they will pay your lenders. It is easy to get started in credit counseling and you can be setup in a short amount of time. You can get a quote for debt consolidation as soon as today!