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[D95]Debt Consolidation For People With Bad Credit

by Connie Barker, Con

Debt consolidation is a tool to help a consumer climb out of high interest debt and revolving payments that force a consumer to only pay the minimum monthly balance. A debt consolidation loan takes all of your debt and pays them off in one blow, knocking out high interest payments and revolving credit card payments instantly. With the debt consolidation loan the consumer can now focus on one loan instead of several.

Debt consolidations loans have lots of benefits. Instead of having several very high interest loans, you have one manageable, usually lower interest loan to focus on. Debt consolidation loans also pay off your existing debt so any problems with old credit card lenders are wiped clean and you can start fresh with an old lender at a later date if you wish. Many credit cards require a minimum monthly payment which is usually all interest, why pay five bills each for $30 when you can pay only one bill for less and knock out the revolving interest payments.

As you can see debt consolidation for people with bad credit is an extremely powerful tool for anyone suffering from bad credit and can be one of the lifelines that can help people climb out of debt and start to improve their credit rating.

Many lenders offer debt consolidation loans. Usually a lender will require some collateral, it may be part of refinancing your mortgage or you can work with a lender for an unsecured loan. Another strategy is to apply for a high limit credit card with a low interest rate and transfer the balances of your old card to the new cards. However, be careful not to fall into the same trap as before when having cards with little or no debt on them. One way to protect yourself from falling into the bad credit trap again is to cancel your existing credit cards once you pay them off completely with your debt consolidation loan.

When faced with mounting financial obligations, it's easy to fall prey to any number of the advertisements you see on television, in magazines and newspapers, on the radio, in your email box, or on the Internet, promising to either eliminate your debt altogether--or to "consolidate" your debt. In this article, we're going to look at how the debt consolidation process works.

It's a tempting thing to have a company take all your bills, roll them into one package, and then have you pay them off with one lump monthly payment, often less than the combined total of your individual bills. But let's look at what's really involved. The pitch is that debt consolidation companies will reduce your monthly payment on what's known in the industry as UNSECURED DEBT, which includes credit cards, utilities, or anything else you bought that wasn't secured by a piece of property that could be foreclosed upon by the lender. Your home mortgage, on the other hand, is a secured debt, which is the key to how debt consolidation companies function.

When you contact a debt consolidation company, the first thing you'll find yourself doing is answering a number of questions concerning your home--how much equity you have, your monthly payments, how long you've been in the home, and other things. Since your home mortgage can (and often is) the largest monthly payment you have, you might be lulled into thinking that they're merely asking in order to add your house payment into your monthly debt total.

However, there's something potentially ominous behind those seemingly innocent questions. The company is asking questions about what's generally the most valuable asset of a family--their home. Why? Because their plan is to combine all your unsecured debt and turning it into SECURED debt--by tying it to your home.

There are several potential dangers involved in that. First, if you find that you can't make the new, lower payments in the future, you'll find yourself not only continuing to have bad credit (which is something that you could ultimately live with, even as difficult as it would be). But you could actually find yourself losing your HOME, as well--a situation that could be life-threatening!

But debt consolidation companies say they can lower your monthly payments by a significant amount, and that's why you sought their help, right? Well, your must understand that the debt consolidation company won't lower either your overall debt load or interest rates. What they'll do is extend the life of your loans by transferring them from short-term (1-3 years) into long-term loans, which can take as long as 30 YEARS to pay off. You may lower your monthly payment, but you'll be paying up to THREE TIMES as much for those things you owe money on--for DECADES to come!

So, regardless of how much debt you're faced with, be smart, and before you sign with a debt consolidation company, ask them EXACTLY how they plan to help you, how long it will take to pay off your debt, and what they'll get out of it, since they're in business to make money, just like every other company in the world.

Copyright ? Jeanette J. Fisher

Article Source : Debt Consolidation In New York

About Author

Both Connie Barker & Jeanette Joy Fisher are contributors for EditorialToday. The above articles have been edited for relevancy and timeliness. All write-ups, reviews, tips and guides published by EditorialToday.com and its partners or affiliates are for informational purposes only. They should not be used for any legal or any other type of advice. We do not endorse any author, contributor, writer or article posted by our team.

Connie Barker has sinced written about articles on various topics from History, Finances and Debt Consolidation. Connie Barker is the owner of several financial websites including those that deal with . Connie Barker's top article generates over 40500 views. to your Favourites.

Jeanette Joy Fisher has sinced written about articles on various topics from Real Estate, Network Marketing and Real Estate. Jeanette Fisher teaches how to get out from under and how to use credit to make money. Free ebook "Credit Tips". Jeanette Joy Fisher's top article generates over 135000 views. to your Favourites.