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An Overview of Student Loan Debt Consolidation
A student loan debt consolidation loan allows you to combine
your federal student loans into a single loan with one monthly
payment. The repayments of a student loan debt consolidation
loan can be significantly lower than the payment required...
Debt Consolidation 101
Debt consolidation occurs where one takes out a loan in order to
pay off two or more existing debts. Consolidating existing
unstructured debt into one personal loan may save on your
monthly outgoings while, at the same time, offering a...
Eliminate Your Personal Debt By Debt Consolidation
If you have personal debt, then debt consolidation or credit counselling are probably the best ways there are to reduce or even eliminate your debt. This is a quick solution to a problem that could potentially last for years, even decades. In fact,...
Federal Debt Consolidation Loans For Students
For American students, the U.S. Government came up with a plan that can help a student manage their student loan debt. The plan they came up with is called a Federal Direct Consolidation Loan. It does not matter if you are a recent graduate student,...
Guide To Free Debt Consolidation
There are innumerable people under debt who are plagued by the pressure of paying back their dues to collection agencies. This calls for consolidating their debts. Debt consolidation is a process that saves an individual from handling large debts of...
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Use Caution When Entering Into Debt-Consolidation Loan
To the person drowning in debt, a debt-consolidation loan looks a lot like a lifesaver. But agreeing to such a loan without understanding it completely could be a serious mistake.
Here's the way it's supposed to work: You pay off all your small, high-interest consumer debts with the proceeds of a new, low-interest loan that has a lower payment than the total of the smaller payments.
In theory, consolidation is a terrific solution for a burdensome debt situation. In reality, it can force you into even more treacherous waters.
Basically, there are three ways to consolidate:
* A new, low-interest signature (unsecured) loan from an individual, bank or credit union. If you can get it, this type of debt consolidation is ideal.
* Transferring all of the balances to a new credit card. Beware of excessive transfer fees or other troublesome conditions buried in the fine print.
* A home-equity loan. It sounds great to pay off your high-interest debts with money borrowed against your home's equity. But this only increases the stakes. Now if you fall behind, the lender takes your home through foreclosure.
There is one more significant danger that all of these types of consolidation loans have in common. I call it the "doubling effect." If you've ever lost 10 pounds and gained back 20, you'll understand right away. Most people who pay off all their pesky credit card balances look at those zero balances with a sense of personal accomplishment. They've done something remarkable. They didn't really repay their debts, but they
enjoy pretending. They say they won't use those accounts again, but they fail to close them.
Statistics indicate that the person who consolidates to a new loan will enjoy the zero balances for a short time, but will eventually charge them back to all-time highs. The average time is two years. That means double the trouble because of the debt-consolidation loan.
Before proceeding with any type of debt-consolidation loan, make sure you get honest answers to these hard questions:
* Is the total consideration -- not just the monthly payment -- of the debt-consolidation loan (principal and interest) less than the consideration combined for all the debts it will pay off?
* Are the terms reasonable? If, for example, the new loan or credit card carries significant penalties (you lose the attractive interest rate if you are late with one or two payments), that is not reasonable. If you must pay a big loan origination fee, that is not reasonable.
* Am I mature enough to cancel the accounts that will be paid off in the consolidation process?
Except in extreme cases, the best way to face a load of unsecured consumer debt is to stop adding to it, develop your Rapid Debt-Repayment Plan (you can see a demonstration of how this works at http://www.cheapskatemonthly.com), then buckle down and get to work!
About the Author
Marc Sylvester is expect based in Edison, NJ . He holds expertise in the banking and finance sector and is a consultant to leading business houses.
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