Credit card consolidation loans seem like the perfect solution to get rid of amassed debt.
The consumer can roll all outstanding debt into a tidy little package, make creditors happy, and move on with their lives.
If only it were that easy.
It isn't the consolidation that is a problem, but the principle is very sound.
It's the credit card consolidation loan that is risky.
Unless the consumer owes only a small amount and can find an unsecured loan for enough to cover debts, the loans are more often than not secured ones.
That means a second mortgage or a home equity loan.
While the interest rates look better than the ones on credit card debt, all it takes is a good look at what the rates will amount over the years, and it is easy to choke.
Yes, credit card consolidation loans allow the consumer one monthly payment, and there's a lot to be said for the option, but it's the collateral put up which is so dangerous.
No one foresaw the current state of the economy, and certainly there's no crystal ball to say what it will be like ten years from now.
So logic should say that it isn't wise to commit to a loan that uses personal property assets as collateral.
This is especially true when there are other methods available that don't require loans.
Rather than seek credit card consolidation loans as the first instinct to debt relief, options like debt management and debt relief should be investigated.
Both of these methods work to pay off debt without the necessity of a loan, and both work much quicker too.
Each consolidates payments into one monthly sum, but professional negotiators work with creditors to reduce the principle balance before repayment even starts.
There's no reason to use collateral when a debt can be paid off at a lesser rate.
That's what a good resolution company can do for a consumer.
Creditors have been given stimulus money and incentives to work with consumers, and they would far rather accept a reduced principle amount than see a consumer declare bankruptcy.
They would rather get a portion of the balance rather than nothing at all.
It makes sense for both creditors and consumers.
Consolidation programs can see a consumer free of debt within 12-48 months depending on levels of debt, and doing it without a loan is the most optimal way of getting there.
The consumer can roll all outstanding debt into a tidy little package, make creditors happy, and move on with their lives.
If only it were that easy.
It isn't the consolidation that is a problem, but the principle is very sound.
It's the credit card consolidation loan that is risky.
Unless the consumer owes only a small amount and can find an unsecured loan for enough to cover debts, the loans are more often than not secured ones.
That means a second mortgage or a home equity loan.
While the interest rates look better than the ones on credit card debt, all it takes is a good look at what the rates will amount over the years, and it is easy to choke.
Yes, credit card consolidation loans allow the consumer one monthly payment, and there's a lot to be said for the option, but it's the collateral put up which is so dangerous.
No one foresaw the current state of the economy, and certainly there's no crystal ball to say what it will be like ten years from now.
So logic should say that it isn't wise to commit to a loan that uses personal property assets as collateral.
This is especially true when there are other methods available that don't require loans.
Rather than seek credit card consolidation loans as the first instinct to debt relief, options like debt management and debt relief should be investigated.
Both of these methods work to pay off debt without the necessity of a loan, and both work much quicker too.
Each consolidates payments into one monthly sum, but professional negotiators work with creditors to reduce the principle balance before repayment even starts.
There's no reason to use collateral when a debt can be paid off at a lesser rate.
That's what a good resolution company can do for a consumer.
Creditors have been given stimulus money and incentives to work with consumers, and they would far rather accept a reduced principle amount than see a consumer declare bankruptcy.
They would rather get a portion of the balance rather than nothing at all.
It makes sense for both creditors and consumers.
Consolidation programs can see a consumer free of debt within 12-48 months depending on levels of debt, and doing it without a loan is the most optimal way of getting there.
Source...