For Many Debtors, Credit Card Debt Consolidation May Not Be the Answer
For many people affected by the current financial downturn, credit card debt consolidation may sound like the best way to finally tackle the card bills that have been inexorably piling up.
However, this might not always be the best solution.
Debt consolidation commonly involves taking out a loan in order to pay off all current outstanding debts.
The debtor is then left with a single monthly payment, which in theory should be easier to handle.
However, if the borrower's current financial situation is such that monthly payments can barely be covered, problems surely await.
Debt consolidation loans can be quite predatory, owing to the fact that these are financial instruments used as a last resort.
Dealing with the painfully high interest rates and penalties that unscrupulous firms may impose can take an even heavier toll on one's finances.
Some companies also offer to take care of the entire credit card debt consolidation loan process for their clients.
While a good number of these consolidation loan service providers operate fairly, it must also be remembered that almost any loan for consolidating and paying off previous debts is of the secured type; that is, collateral will commonly be required.
If debtors do not have considerable equity in their houses or other designated collateral, and if they do not have the discipline and capacity to pay all monthly installments regularly, they may end up worse off than when they started.
Credit card debt consolidation services also work with the fact that the basic balance owed remains almost the same.
In some cases, hefty interest rates can push that balance even higher.
However, some financial companies now offer alternatives to simple debt consolidation that can actually reduce debts payable by up to 60% of what was originally owed.
These services take an active part in ensuring that clients become debt-free in as short a time as possible, a marked contrast from consolidation loans that simplify but not lighten clients' financial burdens.
However, this might not always be the best solution.
Debt consolidation commonly involves taking out a loan in order to pay off all current outstanding debts.
The debtor is then left with a single monthly payment, which in theory should be easier to handle.
However, if the borrower's current financial situation is such that monthly payments can barely be covered, problems surely await.
Debt consolidation loans can be quite predatory, owing to the fact that these are financial instruments used as a last resort.
Dealing with the painfully high interest rates and penalties that unscrupulous firms may impose can take an even heavier toll on one's finances.
Some companies also offer to take care of the entire credit card debt consolidation loan process for their clients.
While a good number of these consolidation loan service providers operate fairly, it must also be remembered that almost any loan for consolidating and paying off previous debts is of the secured type; that is, collateral will commonly be required.
If debtors do not have considerable equity in their houses or other designated collateral, and if they do not have the discipline and capacity to pay all monthly installments regularly, they may end up worse off than when they started.
Credit card debt consolidation services also work with the fact that the basic balance owed remains almost the same.
In some cases, hefty interest rates can push that balance even higher.
However, some financial companies now offer alternatives to simple debt consolidation that can actually reduce debts payable by up to 60% of what was originally owed.
These services take an active part in ensuring that clients become debt-free in as short a time as possible, a marked contrast from consolidation loans that simplify but not lighten clients' financial burdens.
