Debt consolidation allows you to take multiple existing debts and roll them up in to one manageable repayment every month. There are no shortages of companies willing to give you a low interest secured loan to enable you to pay off credit cards, store cards and other unsecured debt.
Unfortunately though, debt consolidation has received some bad press recently as loans were given to unsuitable people, but that doesnt mean that they arent the right solution for many others looking to deal with their debts in a sensible and adult manner. Here are 4 reasons why a debt consolidation loan is still a great alternative to filing for bankruptcy.
Reduce Stress With One Fixed Monthly Repayment
One of the biggest reasons people dont deal with debt is because as more bills come through the door they get hidden away or left unopened because many of us dont want to acknowledge that there is a problem. The unopened bills cause mental stress and the arrival of the mailman each morning brings more dread and tension. The debt consolidation loan can help alleviate this because all your creditors are paid off and you should only be getting one fixed bill per month rather than drip feeding you more stress each day with the arrival of more bills to pay.
Lower Rates of Interest
Since the consolidated loan is secured on your home the lender will offer you much lower rates of interest often a third or a quarter of what you might pay on a credit card. If you have a $10,000 unsecured debt with an average of 15% interest you could reduce that to around 5% with a secured debt consolidation loan.
Pay Debt, Not Interest
The problem with credit is that you are paying off interest each month which doesnt get you anything. Every month you are paying more interest which lines the pockets of the credit company and gives you nothing in return. Paying off the whole debt means that you can say good riddance to the credit company and not be held hostage repaying high rates of valueless interest each month.
Dont Lose Your Possessions
One of the reasons consolidation loans have got a bad reputation in recent years is because they are secured loans which means you have to use your house as the asset and it could be repossessed if you fail to keep up repayments. Credit cards and other unsecured debt means your house cant be repossessed but as anyone with debt problems can tell you, the thought of the bailiffs knocking at your door with the right to take anything of value might mean that you just end up living in an empty shell anyway whats the point of losing all your possessions and potentially losing your house too? Far better to consolidate your debt, work on your money management and keep your home and possessions.