Debt Consolidation

While there are many advantages to debt consolidation, there are a few concerns anyone should be aware of before consolidating.

You need to watch out for scams and non-profit credit counseling companies which are actually for-profit companies, as well as things which are actually a disadvantage to you – sometimes the benefits which a DMP can provide are actually benefits you could get yourself from the lender if you just ask, for example on a student loan, in some programs after a certain number of on-time payments, your interest rate is lowered a little bit.

If you go with a debt management program or consolidate your student loans with a bank or other lender, you start over with the time period, so it can actually take longer for your interest rate to go down.

A disadvantage to debt consolidation through a second mortgage or a bank loan is that this is usually a secured loan. If you do not pay this bill, you can lose your home.

Also, you are still in debt, and usually still in the exact same or a slightly lower amount of debt, just shifted around. Many people respond to this debt consolidation as if they have no more debt, and go out and charge up their cards again. Thus, it is easy for a person in debt to end up in even more debt after they consolidate, and there are only so many times you can consolidate.

Tags: credit, creidt cards, debt, debt consolidation, finance

This entry was posted on Saturday, October 18th, 2008 at 4:41 pm and is filed under debt consolidation. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.