Consolidating Your Debt May Help You In A Tough Economy
An economic crisis is gripping the world as of the end of 2008. Families around the world are squeezed and finding it increasingly difficult to meet their obligations. In order to provide a home for their family, transportation to get them around, a means to a better education and nice products for personal enjoyment, many families will extend additional debt beyond their means to pay them back.
When we borrow money it's often just the amount borrowed and the amount of the monthly payments we think about. The interest being charged needs to be considered as well, especially in long term loans or high interest loans. You can end up paying a substantial amount of money just on interest payments if you're not careful. Even the so-called no interest loans can carry significant penalties if not paid off in time. These penalties can come in the form of extremely large interest rates applied to the balance due.
So we continue to use easy credit as our means of getting by as if we could continue doing that forever, eventually getting by more and more by making minimum payments. All of a sudden we have a ton of debt and are trying unsuccessfully to pay for things we purchased long ago. This is where debt consolidation can be the answer to a seemingly unsolvable problem.
A debt consolidation loan consolidates all outstanding loans into a single loan. This single loan may in turn have a lower interest rate than the combined monthly interest payments of the loans being consolidated. In this case, though you are borrowing you're not going deeper into debt and in fact may be taking a first step towards crawling out of debt.
There are other approaches you can try. Either on your own or with help of a responsible third party you can seek to have loan terms revised, with lower interest rates and lower monthly payments being the things usually pursued. You'll normally owe the same amount but will get payment terms which are more in your favor. If you are successful in doing this you need to make sure that you are applying discipline to your money management habits. If you default you probably won't get a second chance.
The structure of the consolidation is key, meaning that whichever consolidation loan or strategy you go with you need to be careful about how it is backed up. For example, third parties might seek to tie the repayment of debt obligations to the deed for your home.
Making your payments on a home equity loan is a must. It's better to lose your car that to face home foreclosure. If in doubt seek a consolidation loan that does not require putting up your home as collateral. Such a loan, generally an unsecured loan, will be harder to find and will probably a higher interest rate. Do some research and figure out which approach makes most sense to you or seek assistance from a financial adviser.
Whatever type of loan arrangement you end up making it's key that you put your household money management practices in order. Start working to a budget and spending wisely. Treat your consolidation loan as if it is the last loan you could ever get and put off purchases whenever possible until you have the cash to pay for the. Easy credit will return once the financial crisis is over but you don't have to follow the sheep and spend your way back into debt.
When we borrow money it's often just the amount borrowed and the amount of the monthly payments we think about. The interest being charged needs to be considered as well, especially in long term loans or high interest loans. You can end up paying a substantial amount of money just on interest payments if you're not careful. Even the so-called no interest loans can carry significant penalties if not paid off in time. These penalties can come in the form of extremely large interest rates applied to the balance due.
So we continue to use easy credit as our means of getting by as if we could continue doing that forever, eventually getting by more and more by making minimum payments. All of a sudden we have a ton of debt and are trying unsuccessfully to pay for things we purchased long ago. This is where debt consolidation can be the answer to a seemingly unsolvable problem.
A debt consolidation loan consolidates all outstanding loans into a single loan. This single loan may in turn have a lower interest rate than the combined monthly interest payments of the loans being consolidated. In this case, though you are borrowing you're not going deeper into debt and in fact may be taking a first step towards crawling out of debt.
There are other approaches you can try. Either on your own or with help of a responsible third party you can seek to have loan terms revised, with lower interest rates and lower monthly payments being the things usually pursued. You'll normally owe the same amount but will get payment terms which are more in your favor. If you are successful in doing this you need to make sure that you are applying discipline to your money management habits. If you default you probably won't get a second chance.
The structure of the consolidation is key, meaning that whichever consolidation loan or strategy you go with you need to be careful about how it is backed up. For example, third parties might seek to tie the repayment of debt obligations to the deed for your home.
Making your payments on a home equity loan is a must. It's better to lose your car that to face home foreclosure. If in doubt seek a consolidation loan that does not require putting up your home as collateral. Such a loan, generally an unsecured loan, will be harder to find and will probably a higher interest rate. Do some research and figure out which approach makes most sense to you or seek assistance from a financial adviser.
Whatever type of loan arrangement you end up making it's key that you put your household money management practices in order. Start working to a budget and spending wisely. Treat your consolidation loan as if it is the last loan you could ever get and put off purchases whenever possible until you have the cash to pay for the. Easy credit will return once the financial crisis is over but you don't have to follow the sheep and spend your way back into debt.
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posted by Credit Counseling at
2:03 AM
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