Debt is far from an easy fix. Yet, most think it is. And to take this thought and actually put it into action, most indebted individuals will typically opt to go with the financial fixing option of debt consolidation; this is so because of the easiness that is tagged onto this type of financial servicing. However, debt consolidation can, in fact, trick and subsequently entangle you in a worse off financial position. The reality is that debt consolidation loans can, if not chosen carefully, amplify your debt and overall dismal financial situation. You need to watch out for unscrupulous actions and plans that are worked out behind the scenes, especially away from your field of vision.
Be mindful of rates that are inflated beyond comprehension, fees that are not revealed until it's too late, expensive add-ons through the debt consolidation process and actions that will yield damaging outcomes to your credit score and rating.
Not a One Way Ticket to Being Debt Free
A great percentage of debt-dwelling individuals feel that confiding in a debt consolidation plan is the one all, end all solution. That it is the one way ticket they've been trying to obtain to get to a debt-free life. Their logic is hopeful, yes, but it is simple as well - taking problems and making them less bothersome, more singular. Leaving multiple bills behind, they become aware of the chance to pay just one bill, even with the prospect of lower, more convenient monthly payments.
But, with their logic in mind, what could make pursuing debt consolidation problematic? One, the process of debt consolidation acts only as a face value fixer; it doesn't focus on the impetus in which drove the indebted into debt, which is none other than overspending. And two, the loan to get "debt free" can actually be more costly as they are wrapped up in concealed fees, pricey insurances and other add ons to spur lender profits.
Personal Loans to Consolidate Debt
In the sphere of debt consolidation there are two types of loans that are usually utilized: ones based on home equity lending and personal lending. For home equity lending consumers are left to borrow against the value (or built up equity) of their houses. Personal lending works in the same way, except the borrowing isn't held against a home, but rather an actual promise to repay (whether this be outlined in a written contract or agreement).
In terms of using personal loans through the process of debt consolidation know that you will be paying much more, especially if you have poor credit.
Costing You More: Money and Time
Debt consolidation can cost you both money and time. If you have serious cases of debt or are troubled with bad credit interest rates know that they will not be in your favor and can reach upwards to 17- 22%. Also, consider that there are upfront fees as much as 10% of the total loan amount. In terms of time, most consumers will opt to go with the initial offer of lower payments instead of lower costs through debt consolidation. However, doing this will affect you two-fold; it will take longer to pay off your debt, and, to boot, the total amount you will have to pay will be inflated.
Don't fall for the tricks involved in some debt consolidation offers. Be sure to qualify yourself and if you're fitting, then do some research to find the best, most reliable consolidation opportunities out there.
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