Debt consolidation loans are one of the popular ways that many consumers use to help erase debt and gain control over multiple debt obligations, but there are various consolidation plans that consumers have used to pay off debt, some of which may be more beneficial than others. There are, according to advisers, both good debt consolidation practices and bad debt consolidation decisions which consumers may implement when seeking some form of debt relief through a consolidation plan.
Some of the more common forms of debt consolidation may, however, be either beneficial or troublesome for consumers depending on how they use these consolidation plans. There are some debt consolidation companies or debt relief agencies which have come under scrutiny over the past months because they offer services to consolidate and erase debt for consumers, but may end up costing just as much or more over the long run after their services have been rendered. Consumers who use these organizations are often advised to heavily research what is offered, pricing breakdowns, and make sure that a debt consolidation/relief firm is reputable before pursuing a relationship with a particular company.
Some advisers often argued that consumers can speak directly with creditors and erase their debt just as easily as a consolidation firm, since agreements are worked out in a similar fashion. These arguments that consumers can contact a creditor and work out some form of debt relief assistance just as easily as a debt relief company may be true in some cases, but again, there are reputable organizations which have been able to benefit consumers in a bad financial position.
Yet, there are also debt consolidation options through either balance transfers for credit card debt or using cash-out refinancing on a home loan. Obviously, again, there have been consumers who have benefited from these forms of debt relief assistance, but homeowners and cardholders alike are warned against using these consolidation options and continuing to build debt afterwards. Essentially, when a consumer uses a balance transfer on debt from sources like credit cards they can benefit in that this will consolidate their debt onto one credit card, which usually can be more affordable when it comes to the interest rate and overall costs. Also, if a homeowner uses cash-out refinancing, they are essentially attaching unsecured debt to their mortgage, which again has been helpful for some, but problems from both refinancing and balance transfers can arise.
Consumers who continue to acquire debt after either using a balance transfer or refinancing will, obviously, not only have a higher amount of overall debt but run the risk of either incurring even more debt when a balance transfer card’s interest rate increases after an introductory period has expired or losing their home if they are unable to meet this higher mortgage payment due to the fact that they are living beyond their means.
Understandably, consumers who are facing difficulties related to various debt obligations can benefit from consolidation loans, but advisers often stress that these individuals should research all of their debt consolidation options and make sure they find the most affordable choice for their situation which will not only allow them to make these payments but will allow them to erase their debt in a timely manner so that less overall costs will be paid. Yet, these advisers also point out that unless smart financial and repayment practices are implemented, debt consolidation may only offer temporary relief from financial troubles in a consumer’s life as debt consolidation doesn’t truly erase various forms of debt but simply move debts into one location, which means that consumers must begin paying down this consolidated debt rather than acquiring more debt in other areas.