For some people, and we emphasis here is on the word some; debt consolidation programs may be a good tool. There are obviously several factors in play, should one elect to go down this road, as these types of companies may be able to lower the interest rates you are paying to your creditors. (More on that in a minute). However, debt consolidation programs are not the best practical and cost-effective solution to take if your are in a financial hardship. Debt consolidation programs in essence, consists of taking out one loan as a way to pay off several other loans and debts you have with multiple lenders. Done right, it can be a useful tool for some people.
We should again emphasis that you should never want to take out a debt consolidation loan for something like credit card debt or other unsecured debt. The reason: these debts can be negotiated and settled for a fraction of what you owe through negotiations. Ease of management is another positive for a debt consolidation loan. One payment each month can be a lot easier than having to pay on four or five separate accounts each month. Nevertheless, a debt consolidation loan is not without drawbacks.
To begin with, a debt consolidation loan is still a financial loan. You have to pay the entire amount back, unlike a debt reduction program such as the one offered by Nationwide Debt Reduction. Second, some of these debt consolidation loans carry hidden risks which you may well not be aware of.
One example of this would be the, “Zero Interest Credit Cards”. While these cards can be very appealing, it is necessary to fully grasp that:
The 0% interest rate does not last forever.
Time limits are typically 6 months to one-year.
Miss a payment and the entire deal goes away immediately.
What will the new interest rate be, once the “teaser rate” expires?
Finally, are there any hidden fees, such a pre-payment penalties, etc? Again, debt consolidation loans can be good for some who want to consolidate secured debt. However, NEVER use a debt consolidation loan to pay off unsecured debt.
For more information about a debt consolidation program and debt settlement program you should read the article on The Difference. Or, call us toll free at 800-890-6658 to learn more.