Debt Consolidation: 3 Things To Know
Debt consolidation is one of the more well-known options that are available to people dealing with debt. Many are aware of the elementary definition of debt consolidation and view it as an easy fix to solving their financial troubles. What many people don’t realize is that there are a number of factors involved when choosing debt consolidation that everyone should take into account. Keep these things in mind when considering the course of action you should take.
Having debt is a hassle because it always seems to grow. Regardless of how much you pay your debt never seems to decrease. This is because of the interest rates normally found on unsecured forms of debt. Multiple forms of debt can have varying levels of interest that accrue over the course of time you owe. As you try to pay down your debt the interest fees replace the amount you pay, effectively cancelling out the effort you make to rid yourself of debt. Debt consolidation allows you to compile your debt into one lump sum and pay it off gradually, oftentimes lowering the interest rate on the overall amount. Instead of paying multiple creditors with multiple rates you make one payment per month to gradually bring down your debt. With consistent payment you can also improve upon your credit score.
When considering debt consolidation you must have an honest assessment of your financial standing to know if it’s the right course of action. There are multiple factors that come into play when approaching the subject of debt consolidation.
Collateral May Be Required For Debt Consolidation
In many instances there might need to be some kind of collateral to compensate for the loan required to completely consolidate your debt. Most people do not have the form of collateral that would constitute as proper payment.
A Co-Signor May Be Required For Debt Consolidation
Before a bank will give a loan in a situation that requires debt consolidation they may ask for a co-signor to ensure they will receive their money back. If payments begin to fall behind the co-signor will be held as responsible for the debt as the individual dealing with the debt.
Your Credit Score Is A Factor With Debt Consolidation
One thing that often gets damaged due to debt is you credit score. Increasing debt and damaged credit go hand in hand. At the time of your filing for a bank loan to consolidate your debt your credit comes into play. Even with a co-signor, bad credit can hinder your ability to be approved for a loan.
Even if you were to make it past all of these requirements you would still be responsible for changing your spending habits to accommodate your new payments. Loan consolidation is an agreement, not a program. You don’t have the advantage of having anyone letting you know what to pay, when to pay and how to keep yourself in good financial standing. On the opposite side of the spectrum is debt settlement. Debt settlement through Guardian Debt Relief differs from debt consolidation by giving you the opportunity to potentially reduce your principle debt without a massive amount of requirements to keep you from getting the relief you need. With proper professional help your debt can be made manageable without leaving you to your own devices. Consider your options and know that debt elimination is not impossible. Take the first step towards debt freedom and contact Guardian Debt Relief today.