Debt Consolidation and Manipulation!

Submitted by Laura Brown

Today, consumers affected by debt problems have many alternatives to consider. One such alternative is that of debt consolidation. Debt consolidation occurs when consumers in essence take out one loan in order to pay of multiple creditors. These loans usually are at a much lower interest rate than other debts. This is deliberate as securing a lower interest rate aids in a quicker repayment period as more of the payment is applied toward the principal of the loan. This is often a wise option to consider before taking a more drastic measure such as bankruptcy.

If you own considerable money on credit cards, the debt consolidation may be a viable option for you. Often credit cards have interest rates that are high, much higher than loan rates offered by banks. Banks can provide consolidation loans to help consumers pay off high interest debt. If consumers own property that can be put up as collateral, such as a home or car, this can help them secure an even lower interest rate on their consolidation loan.

There are some things to be aware of when considering a debt consolidation loan. Often, loans may in reality be a home equity loan. The equity in your home would go toward paying off your debts, which often times includes a great deal of unsecured debt. As a result, you’ve now paid off this unsecured debt by putting your home at risk. If you are unable to pay, you could lose your home. Consumers must carefully study the fees associated with such loans. Sometimes the fees may be especially exorbitant which will not produce the desired result, which is to pay off your debts in a timely manner. Additionally, pay close attention to the terms of the loan. While a company may offer you a low monthly payment, it might be because they have extended the loan over a very lengthy period of time.

This may actual increase your debt load. Sometimes consumers on the brink of bankruptcy may be forced into securing a particular consolidation loan and not provided the opportunity to shop around for the best deal. While these risks may seem scary, there are many credible businesses offering consolidation loans. It’s just important to know what’s right and what could be wrong.