Is Debt Consolidation Really The Best Debt Relief Option?
When the noise is about debt consolidation, there are so many regions to discuss.
It is inevitably one of the most debatable topics in the vicinity of finances. It has proved to be useful and beneficial for many, but it has also destroyed financial profiles of many, who fall prey to wrong debt consolidation methods and procedures.
This article post will satisfy you by evaluating one of the many debt relief options, that are ruling the debt market.
Debt consolidation is not new, or a product of the new age. We have been through this method of debt riddance for generations now. It’s just that it takes up unique forms with different phases of time.
Debt Consolidation is easily defined as a strategy to gather all the debts into one place, so as to evade multiple small to large interest rates, and be able to deal with only one creditor, instead of several of them with their several rules and debt payoff structures.
Well, that’s okay!
It looks fine and ethnic when given the radical definition of the term.
But, what if debt consolidation does not work out the same way for you as it does for many, and you just land into a bigger trouble?
What will you do then? Are you, hence, better off filing bankruptcy, or should be searching for other good substitutes of debt consolidation, when you are getting the chance?
First know Debt Consolidation inside out:
This method of debt relief does not include secured debts. We need to be clear about this part right away!
It only works for loans and credit lines, that do not have any collaterals and assets involved. Thus, don’t expect to see your mortgage or car loan getting away with debt consolidation.
It works good for credit cards, personal loans, payday loans, and obviously sometimes student loans (mostly if they are private).
That’s all! That’s where the boundary ends for consolidation. Nothing more and nothing less.
Wait, hold on! Ain’t we consumers mostly have these unsecured debts with us? I mean, are we even worried too much with secured debts, if the assets involved are having an appraising value?!
Maximum of consumers are bending low due to the burden of credit cards, payday loans, and student loans!
And, this is what makes debt consolifdation the ultimate choice.
When you are consolidating your debts, you are making an amalgamation of all your debts, to have one single interest rate, and one single debt account.
It sounds fantastic for credit cards, isn’t it? Well undoubtedly. That’s why you already have the credit card balance transfer.
In short- Credit Card Balance Transfer:
This distinct form of debt consolidation is designed by the banks and financial institutions to help the consumers get some advantage over credit card debt.
If you are having more than one credit card account, and that too of high balances, then you can surely opt for this strategy. You can work with the same bank, with which you have your existing credit cards, or with a separate bank.
In balance transfer, as the name indicates, you will be taking out a new credit card and transfer all the balances, from your existing credit cards, into it. Once you are done, your other cards’ debts get paid off, they now run clear, and you only have this new card to pay off!
And yes, you will now have only one interest rate!
So, you know that credit cards and debt consolidation go well together. But, what about the other forms of unsecured debts?
The next generic type- a consolidation loan:
Payday loans, personal loans, and any other cash debt require you to use debt consolidation a bit differently.
To tackle them you need to borrow a consolidation loan, that looks exactly the same as a personal loan, only that the purpose of this financial vehicle is to help you pay off your debts.
Here too you can approach banks, and ask for a loan to consolidate your debts. The interest rates for these loans are typically averaged out, in contrast to the mixture of interest rates you have in your debt portfolio.
So, debt consolidation looks cool, and you can manage your debts independently of the amounts you owe.
But, if you have till now read this post minutely, then you must have noticed that debt consolidation is all about borrowing new debts on top of existing debts in your system.
Doesn’t that sound a bit dangerous?
What if you continuously end up transferring balances from card to card, and still use your previous cards and bring home some more debt?
What if you can’t pay off a consolidation loan, that is of a big amount, and face the collections? Do you think you will be again taking up another loan to pay off this one?
Man, that’s a very dirty game you are facing!
Then, how can you really make debt consolidation work for you?
Even though debt consolidation is a very personalized approach to clear your debts, still it is highly advised to work professionally.
You need to make use of authentic and best debt consolidation services. Take the pain to find experienced debt law firms.
When you work with experts, and established debt relief firms and companies, they will set up negotiations with your creditors, and probably even let you delete late fees and penalties on your debts.
Plus, you will be set free of hassling calls from creditors, for now they have to call those law firms or debt consolidation service providers to discuss anything related to your debt accounts.
And interestingly, a well established debt relief service will provide you with a budget plan, and/or a payment plan.
Also all the payments you make against your debt, will be made to the debt consolidation or the the debt relief company! After you make the payment, the company will disburse the amount among your creditors.
Is there any other good alternative to debt consolidation?
No, not at all! Why?!
Because, debt consolidation can impact your credit score and profile positively, unlike any other debt relief option.
Your credit score gets a boost, because ultimately you are paying off your debts in full. It’s not that you don’t get some concession, but still you are actually paying the principal amount.
If you, however, feel that you can’t afford consolidation as you can’t pay off your debts in full, then probably bankruptcy should be your choice.
Or you can follow the modern strategies that millennials use to be debt free!