Debt Consolidation Facts
According to the National Foundation for Credit Counseling, in any given month, 15% of all credit card holders make payments late and 8% are more than one month past due. The combination of $50 late fees and escalation to 30% APR is burden many Americans cannot bear. Further, according to the Pew Safe Credit Cards Project, only 8% of card issuing banks allow interests rates to revert to lower levels after 12 months of timely payments. Once placed on a treadmill driven by exorbitant penalties and interest, the cycle becomes increasingly difficult to escape.
Debt consolidation saves on interests and you have a smaller payment to make. This is the myth that most of us believe in. Actually debt consolidation simply helps you to pay off the debts that you had incurred at a lower rate but the debt is still there.
You may feel that at last you have been able to do something about the debts that have accumulated but true debt help is not easy to acquire. Larry Burkett is a financial author who said that debt by itself is not the problem. Handling its symptoms of overspending and not saving accordingly is much more difficult to tackle than the debt itself.
Free Debt Consolidation Advice Is Given By Whom?
Consolidation companies give free debt consolidation. They chart out a program for their clients. It involves consolidating their dues and preparing a schedule of monthly payment. Such companies assign a debt counselor who advises the distressed customers on debit management. They also provide several financial tips that go a long way in creating a bright financial future.
The best thing about free advice is you need not pay anything to get it. The professionals also talk with your creditors and put in efforts to minimize your monthly payment. They do this by either eliminating late fee or reducing it to such an extent that it doesn’t pinch your pocket.
Among the benefits of combining your debt into one monthly payment has to be the fact that you can reduce your overall monthly expenditures with a single payment option rather than making multiple payments to an array of creditors, which could save you a lot of time.
The disadvantages to a single payment for a larger loan, is that in the long run you will probably be paying more interest over time. This can offset the benefit of an earlier payoff of even one of the loans that have been satisfied by the bundling process.
A definite advantage to debt consolidation is that you will probably not get behind on your payments and receive those aggravating calls from your creditor asking you to please make a payment soon to avoid those late fees that are sure to be attached. Come to think of it there is another advantage of combining your payments into one easier to handle payment you should not have to pay those late fees again. That is assuming that you will make your payments on time.
So far, debt consolidation sounds great. What could possibly be wrong with it? Well, perhaps nothing. Debt consolidation is an ideal solution for some people to get their financial house in order. They are not necessarily good for everyone, however.
One potential problem with a debt consolidation loan might be if the loan is secured by a second mortgage, placing the home at risk if the debtor should default on the loan. Another potential problem with a debt consolidation loan is that is does nothing to address some debtor’s lack of financial self-control.
The best debt consolidation agents will not make uninvited approaches, they will not charge you an advanced fee and they do not charge high interest. Every good company will give you a free face to face consultation to find out what level of debt you have, and how they can help you. They will be very knowledgeable with regard to the law, which is a massive advantage as they know exactly how to approach your creditors.
You will find that a good service will not be pushy; they will leave the decision to take up their offer in your hands and will give you an offer in black and white for your reference. They will not charge you massive service fees and will greatly reduce your monthly payments after consolidating all your debts. Eventually with your on time payments your credit score will improve, and once your loan is paid you will be very much back in the driving seat – a lesson to be learned from all this is the ease that a person can get credit and the greater ease a person can get into financial trouble.