elanoramenna's Space http://elanoramenna.posterous.com Most recent posts at elanoramenna's Space posterous.com Sat, 21 Jul 2012 03:57:25 -0700 The Benefits of Consolidation Loans http://elanoramenna.posterous.com/the-benefits-of-consolidation-loans http://elanoramenna.posterous.com/the-benefits-of-consolidation-loans

Debt is a prevalent issue with many Americans. If you're sick of struggling with payments, have taken loans from multiple sources, or have even suffered wage garnishment and relentless collection calls, you've probably been considering different ways out. One popular option is known as consolidation loans.

Remember this before you proceed: a consolidation loan is another loan. What happens is this: your lender buys up your debt and bundles it into one loan, presenting you with one bill to pay each month instead of the several that you have been paying. Many Americans have found this to help lighten the load of debt on their shoulders.

There are a myriad of factors that make debt consolidation a nice option. For one, with loans that are owed to multiple sources, keeping track of due dates can be difficult. These due dates can fall in rough spots between paychecks, and you can even miss one bill because you're concerned with paying another.

Consolidation loans are not a cure-all for these issues. Although your lender may be able to buy out your debt at a good price, there's a good chance they'll have to turn it around to you at a higher interest rate. This will depend on your credit history. In other cases, it may be a higher interest rate, but it's only interest on one payment instead of several. Regardless, there is a price for the convenience of only having one bill.

Having a consolidation loan can also negatively affect your credit score. When examining your credit, there are a lot of factors that credit bureaus will take into account, and one of those is consolidation loans. Bureaus will notice if you haven't closed some of your accounts (which happened when your lender bought the loans), meaning you've consolidated. This just looks bad on you, because it appears you doubled your debt instead of consolidating. Once you've damaged your credit score, it's a tough road to get back into good standing.

There are instances in which consolidation loans are a good option. These instances include foreclosure and bankruptcy. Examine all your options though. As mentioned above, don't just pay for convenience. If there's a way for you to handle your loans on your own, it's typically better to do so. If it's gotten too far out of hand, then it's time to consider a consolidation loan.

If you do get a consolidated loan, treat it carefully. Respect the fresh start that it is, and don't backslide into the same spending habits that got you into this mess in the first place. Pay on time and more than just the minimum payment amount, because that's an easy way to repair a damaged credit score.

In summary, do your best to manage your debts on your own terms. If you just can't, consolidation loans are a great fall back.

I'm a debt relief professional specializing in low interest debt consolidation loans. Check out www.churchwoodfinance.co.uk for more information.

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