Posts Tagged ‘Debt consolidation benefits’

Debt Consolidation – Benefits and Risk Factors

is an ultimate financial tool that can help you manage your debts and pay off the same without so that you can regain control of your finances. Sometimes, you keep on accumulating debts without realizing that you are actually pushing yourself toward the worst financial crisis. In such cases, bankruptcy often seems to be a suitable option, but it is very important for you to keep in mind that even when you go bankrupt, it does not help you get rid of all your debts. There are certain types of loans and dues that are never discharged. That is the reason the process of consolidating debt is often considered as a great alternative to bankruptcy.

What Is Debt Consolidation?

Debt consolidation, as the term clearly explains, is a process where all your debts are consolidated into one while making the terms and conditions a little more favorable to you. An agency or a company works as a mediator in this process, where a debt management expert talks to your creditors and convinces them to make things a little easier so that you could continue making the monthly payments and avoid making further defaults. The agency now represents you. You make a single consolidated payment to the agency and then the agency pays to the respective creditors. This way, the process becomes completely hassle-free for you. However, it is also very important for you to keep in mind that the services offered by such agencies are usually not free. You will be charged a certain amount of money every month as their fee. If you do not want to pay the fee, you must do a thorough research and find a genuine non-profit government approved agency

Benefits

Debt consolidation offers a wide array of benefits. To start with, it immediately stops the harassing collection calls. You no more need to contact your creditors or the debt collectors directly; your agency will be representing you. It is very important for you to keep in mind that it is not “debt elimination”; your debts do not get eliminated in this process. It is just that it makes things a little easier for you. For example, the creditors may agree to waive off the penalty charges, to reduce the rate of interest, and/or to increase the repayment period. You still owe your debts, but when you consolidate your debts, you get an easy way to overcome your ever-mounting high-rate debt liabilities. Managing your debts also becomes very easy, as you no more have to deal with different loans individually. You just make a single monthly payment to the debt consolidation company while the company further transfers the payment to your creditors. Overall, the process also saves you a great deal of time, which you can use in more productive things, such as focusing on your employment and managing your business and finances.

Risk Factors

IF you are working with a genuine debt consolidation company, there are no risks at all, especially if you are not charged additionally for the services. However, you need to beware of those unscrupulous companies who are only interested in your money. They attract you by making highly-alluring promises, such as “your debts removal is just a click away”, “get rid of your debts within a week”, and other such things. Always remember, if something seems too good to be true, the chances are that they are. So, beware of such false promises; the process of is not a magic wand. After all, you did not accumulate your debts within a week, and it won’t go away overnight.

If you are serious about achieving a debt-free life, you must show some great financial discipline while you follow the process of debt consolidation.


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What are the pros and cons of debt consolidation?