Debt Consolidation Advice and
Explanation
Many
people seem to think that debt consolidation should only be done if
you are already in financial distress. This is simply wrong as it
can also greatly help those who have multiple debt products that
need to be paid monthly. Firstly, it is very likely that with
multiple debts to settle every month that you can easily forget to
pay for one and be given a black mark in your credit card for it.
Secondly, it is also more than likely that if you add up the
interest paid for all your debt products, you will be shocked at
how much actually goes into just servicing useless interest payment
for these debt products. The solution is to take care of your debt
responsibilities with one cheap loan. To make it simple, imagine
paying off your expensive 18% per year credit card debt with a loan
for 4%, you are immediately saving a whopping 14% per year on our
debt. The math really is that simple, you can ask for a loan and if
the sum of your interest rates with your debt factored in is less
then the debt consolidation loan then you should go ahead and apply
for the loan.
The
problem is that many people don’t understand that debt
consolidation isn’t a method reduce debt, rather it a method of
making debt slightly cheaper or extending it an extra few years so
you have a lighter burden. If you are still in the habit of buying
unnecessary things on borrowed money then debt consolidation is not
going to do anything for you unless you first learn to reduce your
dependence on debt products. A recent study on the success rates of
debt consolidation programs have indicated that a whopping 68% of
clients who have managed to contain their debt have managed to put
on even more debt because they continue with their spending even if
they know they can’t afford it in their current financial
inebriety.
I highly
recommend that if you have a habit of spending more than you can
afford that you actually address that problem first unless you have
left your situation first. It is very unwise to address the
knock-on affect of your spending before you actually learn to curb
your debt spending. This is mostly the same for anyone with bad
credit wanting to apply for a loan with bad credit but not wanting
to settle the issue of them getting into the rut in the first
place. You should only approach debt consolidation first if you are
really pushed into the corner. At that stage you must take out a
loan to save you from bankruptcy and when things have settled you
absolutely must learn to control your finances so you aren’t put in
the same situation again.
If the
push really comes to shove and you have enough evidence to support
the fact that you are heading in a downward spiral of debt and
can't use normal methods to regain your financial position then you
can call upon the use of debt relief packages or debt consolidation
services before you consider filing for bankruptcy as a last resort
too. These services are extremely beneficial not only to help you
out of the red but will also give you a good opportunity to learn
how to settle, manipulate and carve your finances so that you don’t
have to file for bankruptcy even if you are stuck in a
corner.
I
believe that bankruptcy should be avoided or at the very least put
off as long as possible as the long term damage that bankruptcy
causes is much worst than many people think it is. The black mark
of bankruptcy will make it almost impossible for you to obtain
financing for any of your life purchases you want to make in the
future unless you willing to get the sqeeze from lenders when
servicing your loans in the future.
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