Why Should I Consider Debt Consolidation?
Debt consolidation is the simplest and most straight forward way of managing your existing debts and reducing your monthly expenses. In its simplest forms you get one larger loan to enable you to pay off several smaller loans or debts. For example if you had 4 credit cards each having $1,000 outstanding then you secure a loan for $4,000 and pay off in full the credit cards. The obvious benefit of this type of debt consolidation is that you now only have one loan to service each month and you should have agreed a loan at a substantially reduced interest rate than each of the credit cards. For example 4 times $1,000 at 20% p.a. equates to a monthly interest payment of $66 whereas a $4,000 loan at say 7.5% p.a. would be a mere $25 per month. These figures would represent a saving of $500 p.a. on the outstanding debt of $4,000. If the $500 were used to further reduce the capital outstanding then you can soon see what a good idea it is to consolidate debts into one loan.
There are many ways to achieve debt consolidation with the simplest you apply for a loan, it is approved and you pay off the smaller debts. If however your debts are more substantial then the difficulty is getting a loan and bringing the whole solution together. This where debt consolidation companies come into play. A debt consolidation company will handle all the debts and be able to put a solution forward for a loan for the obvious reason that you a saving a considerable sum of money. The debt company would have to ensure that each of the smaller debts were paid off.
If you secure a debt consolidation loan then you have a permanent solution to you problem and not just a short term relief. A debt consolidation program does not impact on your credit status or more conversely you will be able quickly to repair any damage you may have done in the previous months as a result of any late payments and penalty charges.
Whether manage to consolidate your debts yourself or use the services of a debt settlement company then you remove all further communication with the creditors because the debts will have been settled. No more chasing 'phone calls at all times of day and night.
Other alternatives that people may have had suggested or considered are debt settlement and bankruptcy but personal debt consolidation is a preferable solution in all cases unless there is just no way to secure a consolidating loan or service the repayments (you shouldn't be able to secure a loan if you can't afford to make the repayments).
The bankruptcy route can seem attractive at first glance but the effects of a bankruptcy case will remain with you for years and more to the point remain on file for years. Almost any company you wish to deal with would potentially wish to look at your credit status and if the great big B for Bankruptcy is what is seen then this could effect where you live, you ability to relocate, you job, your marriage and more. You should do all you can to avoid bankruptcy if possible.
Debt consolidation helps you reduce you payments to manageable proportions, gets rid of many smaller chasing debtors and genuinely helps you help you get your own house back in order. Take a look at the get funded website providing further help, resources and links.
Source: http://ezinearticles.com/
Added: September 8, 2008
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