Debt Consolidation - Preventing Debt Problems at an Early Age
Why has 'debt consolidation' become such a common phrase nowadays? Unfortunately, the answer's straightforward - it's because debt has become a way of life for so many. It's a sorry reality for even the youngest adults in our society, as illustrated in a recent publication from Rainer, the national charity for under-supported young people.
Published in May 2008, the report looks at credit, debt and other financial issues confronting today's youngsters. It 'picks apart some of these challenges and, drawing on the direct experience of the young people facing them, sets out the action required to overcome them'.
'Unavoidable route into debt'
Joyce Moseley, Rainer's Chief Executive, talks of the 'often unavoidable route into debt'. On Rainer's behalf, research and consulting organisation YouGov found that 90% of the young people questioned were in debt by the age of 21. One in five 18-24 year-olds had already found themselves more than 10,000 in debt.
As they start their adult lives, most young people find themselves with very little disposable income anyway, so once debt repayments start taking a 'slice', it's all too easy for their finances to deteriorate rapidly. This goes a long way towards explaining the popularity of debt consolidation loans among young people...
Consolidation - a route out of debt
For many young borrowers, the most important benefit of debt consolidation is simply a reduction of monthly outgoings. Replacing multiple debts with a single consolidation loan gives them a chance to arrange affordable repayment terms. This can mean the debt will take longer to pay off - and possibly cost more in the long run - but cost less each month.
At the same time, a consolidation loan may well come with a lower interest rate than the debts they're paying off, especially if they're high-interest debts from (for example) credit cards, store cards and overdrafts.
Consolidating debt also makes it simpler to manage. Remembering one payment per month is much easier than remembering five. Lenders often issue penalty charges for late / missed payments, so a consolidation loan can actually help people keep their debts from growing.
Consolidation - do it the right way
However, there are risks involved with debt consolidation. When someone pays off their debts (overdraft, credit / store cards, etc.), they have to be careful they don't let these debts start growing again. In fact, it's often a good idea to cancel cards and overdraft facilities, since it's all too easy to borrow a bit here and a bit there until they're in a worse situation than they were before they consolidated their debts - they'll have to make payments to the consolidation loan every month as well as to the new debts they've run up!
Read more about debt consolidation loans here, including advice on how to stay out of debt.
Source: http://ezinearticles.com/
Added: June 13, 2008
About New York In Civil Court, One Nation, Under Debt - New York Times
New York Times About New York In Civil Court, One Nation, Under Debt New York Times, United States - By JIM DWYER The clerk called out the names of the collection agencies, debt owners, credit card companies. It was Friday morning in the Civil Court of New ...College debt a heavy burden - Minneapolis Star Tribune
Insurance on Lehman Debt Is the Industrys Next Test - New York Times
New York Times Insurance on Lehman Debt Is the Industrys Next Test New York Times, United States - The debt was priced at a little above 8 cents on the dollar, leaving companies and funds that insured these debts against default on the hook for the ... Lehman debt auction gives clue to potential losses Lehman Debt Protection Cost Set at Auction Lehman's debt insurers face $360bn bill -