Debt Consolidation - A World Of Debts

Contributed by MortgageLoan.com

• Debt consolidation revealed
  For Americans in general, personal debt to savings has reached an all-time high. So many Americans are immersed in debt and strained by credit woes that a number of aggressively marketed companies have sprung up to provide debt consolidation services and make a buck off the broke.

• Credit counselors, debt management programs and their claims
  Basically, all a credit counselors can do is put you on a debt management program. They can put you on a budget with a structural-built in discipline. You issue them one monthly payment lump sum and they distribute it to your creditors until all the creditors are finally paid, then they close the accounts on your behalf.

  What about the claim that credit counselors can magically cut your cut your debt in half with their debt consolidation program? Poppycock. What they can do is re-age your bills and sort of put missed payments back in line in hopes that you will be able to pay later. Also, when the ads say reduce your monthly debt payments, that is true, however, you may have a lower interest rate but that is coupled with a longer debt repayment term, which is primarily what cuts your payments down.

• Teaser rates
  If you are looking at possible home equity loan to act as a debt consolidation loan beware of the teaser rates; any advertised quotes that range between prime less 75 basis points to prime plus two percent are based upon an A credit rating. Those folks who have worse credit situations should expect to pay prime plus four or five percent and also a point or two in fees. That being said you are better off paying 11 percent on a home equity or debt consolidation loan as opposed to 21 percent on credit card debt, but remember, the length of your debt repayment is going to be longer.

• Debt settlement
  Look out for those too good to be true offers like the “We can cut your debt in half” assertions discussed earlier. If you cannot handle your current debt and you own a home the best way to go is debt consolidation.

  With a debt consolidation loan you lower your interest rate, make the debt you are paying on tax deductible because it’s now a mortgage loan, and stretch out the repayment period to make it more digestible.

  Those service providers that are Debt Settlement companies are unethical and will destroy your credit. Debt Settlement agencies hold the money you are paying them in a account while your creditors squirm and finally give up on collection so the debt settlement company can issue payment for cents on the dollar. Meanwhile, your credit rating is getting raked over coals, not to mention, the money that you save on the partially forgiven bills must be declared as income and taxes are levied as such.

• Get honest, get out
  The best thing to do when you are in debt is to get honest and get out. Many of these hair-brained debt resolution schemes will mess with your credit and won’t get you on the road to solid ground any faster. If you are looking at debt consolidation solutions on a mortgage website you obviously have a home - use it effectively. There are many different programs in which you can use the equity in your home to service debt and use you home asset as leverage to achieve a more favorable debt repayment structure.

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