Consumer Debt Relief Through Consolidating–Consolidation Loans, Balance Transfers, And Refinancing Plans To Erase Debt

Many consumers turn to debt relief options through consolidating various debts as there are numerous types of consolidation options available to assist those with unsecured and secured debt from different sources. Some consumers turn to traditional consolidation loans, while bad credit borrowers may opt for a secured loan to consolidate debt, but specific types of debt, like credit card debt, may offer additional options through credit card balance transfer opportunities as a way to consolidate numerous credit card debts.

When it comes to using debt consolidation as a way to better manage multiple debts and find some sort of consumer debt relief, individuals must make sure that they research options available for their particular situation as the financial life of one consumer will differ from that of another and this could create instances where one form of consolidation may not be optimal. Obviously, individuals who want to avoid problems related to multiple sources of debt do have the opportunity to simply acquire a debt consolidation loan as this can group various unsecured debts or a mixture of secured and unsecured obligations into one loan which can lead to a lower monthly payment. Typically, consumers who use a traditional debt consolidation loan for the purposes of acquiring a lower monthly payment are being proactive in that they fear missed payments could arise in the future as they attempt to combat numerous debts one at a time.

In some cases, homeowners have even used refinancing as a way to get cash back from their home’s equity and use this money to erase multiple debts. This type of refinancing, known as cash-out refinancing, essentially consolidates these debts onto one’s mortgage and, despite consumers having a higher mortgage obligation thanks to this cash-out option, the monthly payment associated on their home loan may be lower than total payments that were required on various debts and, obviously, could come with a lower interest rate as well. Yet, one of the main drawbacks of this type of consolidation is that if a homeowner is unable to meet this higher mortgage payment, they could lose their home as a result.

Understandably, some consumers are simply in a position where meeting multiple debt obligations is not an option due to various personal financial struggles, yet for those who may have already missed payments on certain types of debts or who have defaulted in some cases, there are even opportunities for bad credit borrowers to find a loan that could help them consolidate multiple debts into one affordable payment. While there could be unsecured options for these individuals, a high interest rate may be associated with an unsecured consolidation loan for someone with a poor credit score, but secured loans usually offer the affordability and accessibility that consumers need to group bad credit debts into one loan. Secured personal loans do require collateral, which could be problematic for some, but there are those who have benefited from using a secured consolidation loan as a way to begin the process of erasing debts which have been the source of a bad credit score.

However, there have been some cardholders who have turned to balance transfer opportunities as a way to consolidate multiple credit card debts as many of these types of credit cards offer an introductory period where a low interest rate may be offered. While these types of cards and balance transfer options may allow for an individual to pay off various types of debt with a particular card, consumers are often cautioned about using this type of debt consolidation method as there can be a sharp increase in this credit card interest rate after the introductory period has expired and, if the cardholder does not erase the debt on this card quickly or substantially reduce the debt amount that was consolidated, they could find themselves in a position where they owe on a high amount of debt attached to a high interest rate.

While there are also some advisers who caution against debt consolidation there are some individuals and circumstances where debt consolidation can be problematic. In some cases, consolidating debts through any form of debt consolidation plan could lead to higher overall costs due to the fact that the principal amount on a debt consolidation loan will take longer to repay than multiple debts, which again when factoring in interest, can cause the overall amount one must meet to increase. While many turn to consolidating because they fear missing payments and would rather take a higher overall cost than default on one form of debt or another, consumers must make sure that they are in a position where debt consolidation is in their best interest before proceeding. There are those who have been able to use alternative options, like budgeting in a way that allows them to erase various debts one source at a time, and in some cases, this can lead to debt relief faster and at less cost.