Debt consolidation is a dangerous way of trying to solve your debt problems. It is basically the act of using new credit to pay off a previous debt. This notion seems appealing because there is a lower interest rate on some debt and a lower payment. In the actual sense lower payments exists because the term is extended and the longer you stay in debt, the more you will end up paying the lender. From all financial plans, there are for people with large debts, debt consolidation is the most valuable and least understood by many.
Is Debt Consolidation Right For You?
The truth is always there and you need to know it better and understand it One truth is that debt consolidation does not in any way reduce your debt. If you owe a total of $10,000 in loans and you decide to consolidate that debt, you still will owe the same $10,000. Debt consolidation does not settle or write off any of you debt. Debt consolidation will have an impact on your credit score positively and it is a fact that most people do not know. It improves your credit score as you are paying smaller loans and when a loan is paid in full this impacts your credit card positively.
The third truth abut debt consolidation is that you do not need to own a home to consolidate. There is an advantage though in that anyone who owns a home can quickly combine. But you can still consolidate your debt without owning a home. Debt consolidation is much different from debt settlement and banruptcy.
The truth is that it is not much of a program and you can do it even by yourself. This is if you know enough. Debt consolidation is whereby you lump all your debts and repackage them. Debt settlement involves dealing with a company with aim of reducing what you owe. Bankruptcy is a legal proceeding that requires a judge.
To most people debt consolidation makes it hard for them to seek future Ions. It is sought of truth in most cases but its unlikely anyone will figure out you consolidated your debt. Borrowing money and then taking another loan will likely leave a trail of somebody who pays of responsibly. This will more likely make you a desirable creditor. The main reason why people consolidate loans is that new loans are structured in a way that is more favorable than the old ones. In debt consolidation whatever you owed as a debt before consolidation is the same amount you will owe after consolidating.