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Debt Reduction Consolidation - Tips on Reducing Debt by Consolidation

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If you have so many bills that you can’t keep up the madness, do not head straight for a debt reduction consolidation loan. Consolidating bills could end up increasing your debt and actually lead to higher payments. It is a tricky process.

In the first place if you have high debt and you have missed some payments and over extended yourself, your credit score might not be good. If you have a poor credit score, who do you think will loan you the amount of money you need for consolidation for debt reduction? That’s right. A lender willing to take on a loan to a credit risk is likely to charge high interest rates. Even if you can find a lender willing to do a debt reduction consolidation loan, the interest rate could cause you to pay more each month and pay for more months or years.

As most smart consumers realize, a good salesman works hard to say just the right words. Debt reduction and consolidation lenders sell you the idea that consolidation will cause a debt reduction for you. Do some research. Some of these lenders make big promises that are hard to keep. They might try to get your creditors to reduce your rate or make a deal with you, but there is no guarantee. It might be true that your payments each month are reduced by $50 but it might also be true that you will keep making payments for an extra year. Don’t fall for the hard sell of a sleek salesman. Think it through before you sign on the dotted line.

Another type of debt reduction or consolidation is a balance transfer. One of the problems in transferring debt from one card to another is simple. It can be summed up in two words: Introductory offer. After the introductory offer period expires, the rates often shoot up to the highest possible charge. You are going backwards if you transfer debt on a 15% interest rate card to a card with an introductory rate of 10% for the first 12 months. Ask about the rate after that first year.

If you sincerely need advice about potential consolidation debt reduction, you do not need to pay someone. Debt counseling is provided free through government programs. The National Foundation for Credit Counseling is a free service. If you have a home loan through FHA or a similar program with government funding, debt counseling is available at no charge. It is a free service.

If you absolutely positively need to consolidate debt, look into your home mortgage. If you have equity in your home, borrowing against your mortgage makes sense. Interest rates are lower and the terms are usually 15 or 30 years. Spreading out a loan over a lengthy time is less painful.

If you have a high credit card debt, call the company and try to negotiate a better interest rate or ask if they will reduce your total debt. It’s worth a try. Credit counselors have success, maybe you will too.

If you are serious about reducing debt and can’t do it on your own, ask a legitimate counselor for advice. They might recommend a debt management plan to get your finances in order.

Debt reduction consolidation can work if you avoid the quick fixes and the scams. Once you are deep into debt it takes time and effort to climb back out. That is the cold reality of spending more than you can afford.

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