Finance Debt Consolidation

With the current global economic crises most people are looking for a way to improve their situations by consolidating their debts. Our goal is to help you know if debt consolidation really works and if you can benefit by consolidating your debts. Also you need to know how not to be scammed and how consolidating debt will effect your credit.

Most debt consolidation programs do not get rid of existing debts. They usually just combine multiple payment into one and they can lower the monthly payment be either lowering the interest rate or else by extending the duration of the loan. Debt consolidation loans can be applied to all finds of loans including car loans, credit cards, retail debt, student loans, business loans and home loans. The most common approach to debt consolidation is to roll high interest credit card and retail debts into a home equity line of credit with a lower interest rate.

Although the main purpose in doing debt consolidation is to lower payments, it is important to note that most forms of debt consolidation may actually increase the amount of interest you pay on your loan over time. Refinancing a house at a lower interest after five years may lower your payment slight but it may add another five year on the back of your loan.

You need to be careful when choosing a debt consolidation program. A lot of people will tell you that they can settle your debts for a fraction of what you owe. If you are not already behind on payments, this is not a good idea. If you are behind, you can probably settle these debts yourself without paying a third party their commissions. Their are also several free counseling or christian not for profits that you should check out first.

Another thing to avoid is loan sharks trying to consolidate your financial debt into an (ARMs) adjustable rate mortgages or loans with a balloon payment due 1, 3, or 5 years. Just because brokers can make great commissions off of these loans doesn’t mean these are the best loans for you.

Debt consolidation is a serious step. At best it is only a temporary fix to a bigger problem. You should find out as much as you can about debt consolidation before proceeding.