Live Within Your Means With Debt Consolidation

Will debt consolidation help you live within your means

?This is a legitimate question. If you have asked yourself that question, then you may be facing a mountain of debts, credit card bills, or other loans that are strangling the life out of your monthly budget. One way that you can handle all that debt is to pay it all off by taking out a debt consolidation loan.Debt consolidation means obtaining one loan to pay off more burdensome loans. Sometimes debtors will take out a debt consolidation loan and use the money to pay off several other high-interest debts, such as credit cards, personal loans, or other high-interest loans. This can actually increase the amount of money you have available in your monthly budget.

Never pay a fee to a company for them to "pay your bills for you." You will just end up deeper in the hole than you started.If you're going to have a company negotiate your debts for you, know that you can do a lot of that yourself. But if you do hire a company or individual to negotiate for you, make sure that they are paid from your creditors. You shouldn't pay any additional money for the debt reduction service.

In addition, the length of the loan is often longer than the repayment schedule for your original debts, thus lowering your monthly payment yet again. When you combine a lower interest rate with a longer repayment schedule, you can significantly reduce your monthly payment. You should be aware, though, that lengthening the term of the loan could also mean you pay more in total at the end of the loan than you would otherwise.

One way to use a consolidation loan is to apply the reduction in monthly payments to pay off your debt faster. If you borrow at a lower rate of interest and repay the loan over a longer period of time, you will probably find that you have extra money in your budget. Here is where you need to be cautious. Be sure to use that surplus money to make advance payments on your consolidation loan. You will then be on your way to eliminating your debt more quickly. When applying for the loan, check with the bank officer to make sure you can make advance payments on the principal.

Such a loan arrangement can have several benefits for many people: most important, the new loan has a reduced interest rate compared to the other loans. Your consolidation loan can be obtained for less than twelve-percent interest, while credit cards often bear interest rates as high as 20 percent or higher.

by: Paul Deniel

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