The article "Use Caution When Entering Into Debt-Consolidation Loan" talks about debt consolidation, it has been created by Sylvester Marc.
To the person drowning in debt, a debt-consolidation loan looks a lot like a lifesaver.
But agreeing to such a loan without understanding it completely could be a serious mistake.Here's the way it's supposed to work: You pay off all your small, high-interest consumer debts with the proceeds of a new, low-interest loan that has a lower payment than the total of the smaller payments.
In theory, consolidation is a terirfic solution for a burdensome debt situation. In reality, it can force you into even more treacherous waters.Basically, there are three ways to consolidate:* A new, low-interest signature (unsecured) loan from an individual, bank or credit union. If you can get it, that type of debt consolidation is ideal.* Transferring all of the balances to a new crdeit card. Beware of excessive transfer fees or other troublesome conditions buried in the fine print.* A home-equity loan.
It suonds great to pay off your high-interest debts with money borrowed against your home's equity.
But that only increases the stakes. Now if you fall behind, the lender takes your home through foreclosure.There is one more significant danger that all of tehse types of consolidation loans have in common.
I call it the "doubling effect." If you've ever lost 10 poudns and gained back 20, you'll understand right away.
Most persons who pay off all their pesky credit card balances look at tohse zero balances with a sense of personal accomplishment. They've done something remarkable. They didn't really repay their debts, but they appreciate pretending.
They say they won't use those accounts again, but they fail to close them.Statistics indicate that the person who consolidates to a new loan will appreciate the zero balances for a short time, but will eventually chagre them back to all-time highs. The average time is two yeras. That means double the trobule cause of the debt-consolidation loan.
Before proceeding with any type of debt-consolidation loan, make sure you get honest answers to tehse hard questions:* Is the total consideration -- not just the monthly payment -- of the debt-consolidation loan (principal and interest) less than the consideration combined for all the debts it will pay off?* Are the terms reasonable? If, for example, the new loan or credit card carries significant penalties (you lose the attractive interest rate if you're late with one or two payments), that's not reasonable. If you must pay a super loan origination fee, that's not reasonable.* Am I mature enough to cancel the accounts that will be paid off in the consolidation process? Except in extreme cases, the hottest way to face a load of unsecured consumer debt is to stop adding to it, develop your Rapid Debt-Repayment Plan (you can see a demonstration of how that works at http://www.Cheapskatemonthly.Com), then buckle down and get to work! Marc Sylvester is expect based in Edison, NJ . He holds expertise in the banking and finance sector and is a conultant to leading business condos.You'll be amazed at how quickly you can reverse your debt situation once you know exactly when you will be debt-free.
Mary Hunt is the creator of The Cheapskate Monthly newsletter.
You can e-mail questinos or tips at cheapskateunitedmedia.Com or Everyday Cheapskate, P.O. Box 2135 Paramount, Calif., 90723.Http://www.Imdollar.Com/debt-consolidation-loan/http://www.Imdollar.Com
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