subject: The Truth About Debt Consolidation-an Examination Of The Pros And Cons [print this page] Debt is an essential part of 21st century life, at least for the vast majority of people, but when it increases to unmanageable levels, it can be highly problematic. When people have unmanageable levels of debt, they are usually very desperate and can take the first piece of advice offered to them. The most popular solution when it comes to debt management is debt consolidation. This is simply the process of summing up all high interest debts into one huge amount that is settled using a consolidation loan.
A credit card that has a high limit can also be used to settle the consolidated debt. A person can go through this process personally or by contacting a debt consolidation company. Many people have a common misconception that this process will make all their problems to go away overnight.
The Truth About Debt Consolidation
There are many advantages of debt consolidation. For instance, consumers get to make one simple payment to one account instead of dealing with multiple accounts from different companies. This leaves little room for defaulting. It is also very convenient for consumers.
Since credit accounts usually appear on a person's credit report, debt consolidation will eliminate several accounts from the credit report. All these accounts will be substituted by a new account for the consolidation loan. However, opening the new credit account will lower a person's credit score.
Another benefit of debt consolidation is that consumers get to pay lower interest rates than they would have, if they were dealing with multiple high interest accounts. This is because the consolidation loan carries a lower interest rate and longer repayment terms. The longer repayment period also means that the consumer will be able to make affordable monthly payments to clear the loan.
Debt Consolidation-To Summarise
The popular misconception of debt consolidation as a quick fix can be very misleading. While it may not be the worst technique for dealing with bad debt, there may be better options out there for your own specific situation. The best thing a person can do, when he or she has bad debt, is to talk to debt management consultants to get expert financial advice.
There are many experts in debt management companies who can offer debt advice and tips on how to get rid of bad debt without losing an arm and a leg. These experts are able to look at your financial condition objectively and come up with the most suitable remedy. They will recommend a technique that is perfect for your financial status. Some might even recommend debt consolidation. The best thing about these experts is that they engage their client in the process of finding the best solution for them.
