Don?t Jump into Debt Consolidation
Millions of consumers owe more money than they should. The amount of debt held by Individuals isn't really a shock; no one saves money these days. A lot of the staggering debt in this country is tied up in credit card balances. Credit card debt is especially costly, as the interest rates charged on balances are higher than for other types of debt. One often-suggested answer to the problem of having too much or too many debts is to consolidate them. Is debt consolidation a wise idea? Is it the cheap solution that all of the companies that promote it really suggest?
Debt consolidation, on its surface, appears to be a smart move. The average debtor has nearly ten thousand dollars worth of debt, but that debt is often spread among a variety of different credit cards. Each charge card has its own due date, rate of interest and minimum monthly payment. Each month, the debtor must write checks to every single one of his or her creditors. Debt consolidation companies ease this process by providing a single loan for an amount sufficient to repay the balances of all of the borrower's outstanding debts. The borrower then needs to write a single personal check each month instead of many. If the debt consolidation loan is secured, as with a home equity loan, the interest rate will be lower than the rates charged by the credit card loans the new loan replaces. That being the case, the individual can frequently pay less money every month than he or she was paying before.
Sometimes, consolidating debt makes sense. Each borrower ought to carefully look over the numbers involved before responding to pressure from a consolidation company. Of course, replacing several loans with one affordable, low-interest loan is appealing, but that doesn't tell the whole story. The actual question is "How much will I repay in altogether?" Many lenders promise reduced payments, but those lower payments are often achieved by extending the life of the loan. If you have credit card debts that you might be able to repay in five years, and you replace them with a home equity loan with a 25 year life, you might actually end up paying more money in the end, even if the interest rate is lower.
On occasion, what appears to be a good idea is not a good idea upon closer examination. If you are not sure if a debt consolidation loan is ideal for you, talk this over with a reputable financial advisor.
?Copyright 2007 by Retro Marketing. Charles Essmeier is the owner of http://www.Retro-Marketing.com, a site devoted to affiliate marketing, and http://www.End-Your-Debt.com, a site devoted to debt consolidation, credit counseling, payday loans and personal bankruptcy.
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