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To_Consolidate_Debts_Or_Not

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					Title:
To Consolidate Debts Or Not

Word Count:
491

Summary:
Admittedly, among debt programs, debt consolidation has the most
differing reputation. On the one side, it is the best debt management
program. But still, there are some that advise to steer clear of
consolidating debts as it would only lead to worse debt problems. Despite
the many debates, the question remains if it can really put an end to
debt problems or is it just the start of a new cycle of debt. Finance
experts agree that the first step to determining the truth about d...


Keywords:
debt programs, debt consolidation


Article Body:
Admittedly, among debt programs, debt consolidation has the most
differing reputation. On the one side, it is the best debt management
program. But still, there are some that advise to steer clear of
consolidating debts as it would only lead to worse debt problems. Despite
the many debates, the question remains if it can really put an end to
debt problems or is it just the start of a new cycle of debt. Finance
experts agree that the first step to determining the truth about debt
consolidation is understanding its role in managing debt. Debt
consolidation is rolling all smaller separate loans into a single larger
loan. This comes with a lower interest rates and a longer payment term.
In effect, debt consolidation allows debtors to write a single check for
paying the larger loan instead of writing different checks for different
loans, hence, reducing total payment per month. There are also different
ways in consolidating debt, and the most popular is transferring debts
into one credit card account that has lower interest. Equity loans are
also an option for debt consolidation. This is easy as most banks offer
equity loans for homes, especially if the debtor can prove that he is
capable of making regular payments. There are also lending companies that
offer consolidation packages. However, all these options have drawbacks.
They usually ask for processing fees and may have higher interest rates
compared to the interest of the separate loans. Lending companies and
banks might even require that the debtor put his house or any valuable
property as collateral.

Debt consolidation, in this perspective, draws up a lot of advantages. It
makes for easier payments, lower monthly dues, and at times, lower
interests in the total consolidated debt. However, as with most debt
programs, debt consolidation, as debt management option also has its
disadvantages. First, in putting houses up as collateral, the debtor runs
the risk of having his property foreclosed, in the event that he can't
settle his accounts. Also, if there is a longer term for payment, the
total interest for the consolidated loan is possibly higher even if the
monthly interest is significantly low. Therefore, the debtor does not
really save more money but actually pays more money. Aside from these,
the longer terms of payment would have the thought of the debt hanging
over the debtor's head for a longer time.

Joel Greenberg, a finance executive, advises debtors not to be blinded by
the myths about debt programs, debt consolidation, or debt management
promos. To identify the advantages and drawbacks of using these programs,
Greenberg strongly suggest the use of calculators or debt management
software to determine what option would be better. Computing the total
payments and interest of both the individual loans in comparison with the
consolidated loan will give you a clearer picture of your financial
situation. Getting swayed by false advertisements is not a good way to
save your credit and property.

				
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