Debt Consolidation: Why Most Folks Need Other Alternatives

Most people would benefit more from options other than debt consolidation.  At the point when people are in so much debt that they are seeking solutions, they need to weigh their options carefully.

Because debt consolidation is a loan, it may not even be an option for some.  People who already have bad credit may not even qualify for the loan.  For those that do qualify, the repayment terms will generally include set monthly payments, removing the flexibility of just making the minimum payment.

Many consolidation loans are secured with the debtor’s personal residence.  It is always a risk to attach unsecured credit card debt to your home.  Visa can’t take your house is you don’t pay them back, but Fannie Mae can and will.

One of the biggest problems with consolidation loans are the number of people who, after a few months of relief, start using their credits cards again.  Initially people may have extra cash once they are only making one payment, which is usually less than all the other payments combined.  However, some get comfortable and gradually their credit card balances creep higher and higher.  Many have found themselves much worse off than before they consolidated – they have once again maxed out their credit and now also have the consolidation loan.

Before signing for a debt consolidation loan, review your circumstances and research all of your options.  Alternatives to debt consolidation include consumer credit counseling, debt settlement, and bankruptcy.  The most advantageous option will depend on your individual circumstances and the type of debt that you have.  While each option has both pros and cons, taking the time to consider each option will ensure you select the one that fits your situation best.

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