Get Rid Of Multiple Loans With Debt Consolidation

Only few people are blessed with substantial earnings to meet our ever increasing expenses like transport, electricity etc.

. Our financial crisis aggravates when we find ourselves in a debt trap with insufficient finance to repay credit card bills, home loans, vehicle loans, education expenses and several other loans we have taken from multiple sources. If we are one of the fortunate few to receive annual increases in our salary, then even this very often does not help our debt situation if we have many different accounts and debt. In such an event, debt consolidation can give you respite from the mounting debt burden.

What is Debt Consolidation?

Debt consolidation can take various forms, for instance a loan, a debt review, administration, a voluntary distribution. All of these have one thing in common, that is, your debt gets all put together and you make one payment for all your debt. Now, instead of trying to manage all the different monthly payments, there is one manageable amount to pay.

The Difference Between a Debt consolidation Loan and a Debt Review

Very often people want a quick fix and opt for a debt consolidation loan. What they dont realize is that they are paying interest on interest. In other words, they are taking out one loan to pay another, yet again. And in so doing, they are paying further interest to settle debts where they already had interest. It may be a very convenient method, but it makes no economic sense.

Debt review on the other hand does not incur further interest and very often the interest rates on the accounts are reduced by creditors in order to assist the consumer. Creditor are required to act in good faith by assisting consumers who are over-indebted and many of these creditors do assist by reducing their interest rates so that the repayment terms are shorter.

Both a loan consolidation and a debt review may take some time depending on what the person is paying. On the other hand, it may be a fairly short period to settle all the debt if the consumer pays a reasonable amount and reviews his/her amount when their situation improves.

by: colin Scott

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