subject: Consolidation Credit Debt – A Legitimate Debt Relief Tactic [print this page] Consolidation Credit Debt A Legitimate Debt Relief Tactic
Because consumers are familiar with the term 'credit consolidation', it is often one of the first places they turn when they realize they are too deeply in debt to get out of it on their own. While consolidating all bills into one tidy monthly payment can work, the whole system is not without some detrimental issues.
By the time a consumer is seeking debt relief, they are usually behind in payments and deeply in debt. In order to consolidate credit card loans and get them paid off, it usually requires obtaining a loan to cover all of the charges. Because of missed payments or having so much debt, it is highly unlikely that a loan can be gotten that isn't a secured loan. This means either a second mortgage or a home equity loan, and that secured loan should signal danger.
In taking out a loan to pay off unsecured debts, the consumer is leaving himself wide open to the loss of property. Secured loans like these are usually very long term ones, and even though the interest rate may be lower than those being paid on credit card debt, if the number of years it will take to be paid off is factored in, the loans are actually very expensive indeed. There is also a danger that financial circumstances can change over the years. A divorce, illness or job loss can all lead to once again being behind in payments or even default. In that case, the property can be seized and even foreclosed in order for the lending institution to recover the amount of the loan. In this case, it truly would be bad consolidation credit debt.
Today, there are more options for the consumer that lie between consolidation and bankruptcy. Debt settlement and debt management are two of those. In both cases, and depending on personal circumstances, the consumer can eliminate debt in a quicker time period, retain control over property, and regain control over their finances and credit rating in a sensible manner. While either will be notated on a credit report, as payments are shown to be made and a pay off is completed, the consumer can start to rebuild a good rating in a less amount of time than either with bad consolidation credit debt or bankruptcy debt.
It is not necessary to commit to a long period of time and secured loans to find financial relief, and the consumer owes it to himself to explore all the avenues available.
