Debt Consolidation Loans
Are you struggling with making your credit card payments every month and are interested in taking out a debt consolidation loan to help pay off your credit card debts? You're not alone. These days, many residents of Arizona and across the United States are experiencing their own debt crisis, mostly due to a loss or reduction of income or some other financial emergency. The good news is, you may be qualified to get debt relief, which could include debt consolidation, debt settlement, or debt consolidation loans.
Debt consolidation typically involves combining debts spread over multiple credit cards, as well as unsecured debts like medical bills, retail store charges, or utilities, into a single, more manageable, and more structured payment plan made to a credit counseling agency. On the other hand, a debt consolidation loan entails combining multiple, high-interest debts into one, lower interest loan. Finally, as mentioned earlier, debt settlement is yet another debt relief option that has proven viable for many consumers. With a debt settlement program, consumers who are truly unable to pay off their debts can try and negotiate with individual creditors for a significantly reduced amount to what they owe. These days, these debt relief options have become popular alternatives to bankruptcy - which has a more damaging and longer lasting impact on personal credit.
To explore your debt relief options, request a free debt relief analysis and savings estimate - at no obligation to you.
Pros and Cons of Debt Consolidation Loans
These days, many consumers in Arizona apply for debt consolidation loans to help pay off their credit card debts and other types of unsecured debts (such as medical bills, retail store charges, or even utilities). Generally, debt consolidation loans allow them to combine their high-interest credit card and unsecured debts into one, lower interest loan. However, debt consolidation loans can present certain risks, particularly to one's credit:
A debt consolidation loan involves taking unsecured debt and paying it off with funds that come by way of a "secured" loan. In other words, it is generally a loan where you would have typically put up your home or other asset to get approved. If, for any reason, you struggle to make your loan payment, you would have essentially put your home at risk. Also, in many cases, consumers who get a debt consolidation loan often end up using their credit cards again and start accumulating new charges. As a result, many of them will have new, high-interest credit card debts to deal with on top of their loan. Under this scenario, a debt consolidation loan has, for the most part, not provided relief but made their debt situation go from bad to worse.
Benefits of a Debt Consolidation Program
Depending on their financial situation, many consumers can get relief through debt consolidation, or what's also known as a debt management plan. It is important to remember, however, that a debt consolidation program is not the same as taking out a debt consolidation loan - here's why:
As mentioned earlier, with a debt consolidation loan, the goal is to combine a consumer's high-interest credit card and unsecured debts into one, lower interest loan. Since it generally means taking unsecured debt and paying it off with funds that come by way of a "secured" loan, you could be putting your home or assets at risk should you default on the terms of your loan agreement.
In contrast, with debt consolidation, you are typically combining or consolidating credit card and unsecured debts into one, more structured, and more manageable monthly payment made to a credit counseling agency. Some people also refer to debt consolidation as a debt management plan, or DMP. When you enroll in a debt consolidation program, credit counselors review your finances - taking full account of your debts, income, and other obligations. Once they have a clear picture of your finances, they will typically develop a strategy that can help reduce your debts. This could include: submitting proposals (on your behalf) to creditors asking for reduced interest rates, or the waiving or elimination of any late fees or penalties. Creditors that agree to the proposals are placed into the debt management plan.
The goal of debt consolidation is, with a single, more structured, and more affordable payment plan, you can, ideally, reduce your debts sooner than if you continued making the monthly payments on your credit card debts at higher interest rates.
"What's the Right Choice for Me?"
While debt consolidation and debt consolidation loans can certainly provide relief, remember, both methods work in different ways and can affect your credit in different ways. As mentioned earlier, with a debt consolidation loan, the goal is to combine high-interest credit card and unsecured debts into one, lower interest loan. Since it generally means taking unsecured debt and paying it off with funds that come by way of a "secured" loan, you could be putting your home or assets at risk should you default on the terms of your loan agreement.
In contrast, with debt consolidation, you are typically combining or consolidating credit card and unsecured debts into one, more structured, and more lenient monthly payment made to a credit counseling agency. The goal of debt consolidation is, with a single, more structured, and more affordable payment plan, you can, ideally, reduce your debts sooner than if you continued making the monthly payments on your credit card debts at higher interest rates. For many consumers, debt consolidation, if followed faithfully, may be a preferred way to pay down debts at a more predictable and accelerated pace.
If you are interested in learning about how debt relief can help you, answer a few, simple questions and request your free debt relief analysis and savings estimate. Start today!
