What is debt consolidation and how does it differ from debt settlement?If you have asked yourself that question, then you may be facing a mountain of debts, credit card bills, or other loans that are making your life very difficult. You should think about paying it all off by taking out a debt consolidation loan.Perhaps you should consider a debt consolidation loan. Debt consolidation means obtaining one loan to pay off several other loans.
Talk to your local financial institution (a bank or credit union, for example) about a debt consolidation loan, and use that loan to pay off your other debts. Make sure that the consolidation loan has a lower interest rate than the credit card loans and other personal loans that you?re paying off. That will help you to reduce your monthly payment.
But you do have alternatives. Apart from a debt consolidation loan, there are important changes you can make to reduce your overall debt.An initial step is to stop incurring credit card debt. Cut up the credit cards; at least put them out of sight.
Getting a debt consolidation loan isn?t a panacea. Often the person who needs the debt consolidation loan is in the worst position to get it. And getting a new loan can be very difficult and expensive. Debt consolidation loans often have ?points,? (a point is one percent of the loan), fees, title insurance, etc. The cost of the loan alone can be prohibitive.An advantage to debt consolidation loans is that you only have one loan payment to make. This will make budgeting much simpler and reduce tension. One of the problems of large debt obligations is managing all the payments that have to be made throughout the month.
A possible advantage to debt consolidation loans is that you can pay the loan over a longer period of time. The advantage is that the lengthy repayment period means that you have a reduced monthly payment. One disadvantage of this is that you end up paying more in total, even though you pay a lower rate.
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Source: http://finance.redbright.co.za/is-debt-consolidation-an-option/
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