Debt Consolidation
A debt consolidation loan is one of the most common methods which come to mind when people find themselves in a difficult financial situation. Unfortunately most people who acquire a debt consolidation loan find themselves in much deeper financial trouble than they were in to begin with. In fact statistics show that 70% of Americans who take out a home equity loan or other type of loan to pay off debt end up with the same or higher amount of debt within two years.
Debt consolidation loans do not eliminate debt. They simply transfer debt from one place to another. Initially a debt consolidation loan may sound like a good idea. The lure of a reduced interest rate and lower monthly payments can sound attractive. However the consequences can be worse than the initial problem itself. The fact of the matter is that a debt consolidation loan transfers unsecured debt, which can be negotiated, to secured debt, which cannot be negotiated. Additionally if you default on a loan which is secured by collateral, such as your home, you may face the prospect of foreclosure if you are unable to keep up the monthly payments.
The procurement of a debt consolidation loan in and of itself is no easy task. Many debt consolidation loans require home ownership. If you are fortunate enough to own a home you still will need to qualify for the loan, which may not be an option for someone who is in dire financial straights. With a debt consolidation loan you will end up paying back 100% of the original debt plus interest. Trading an unsecured debt for a secured debt is usually not the answer. A debt consolidation loan can drag out the problem for several years and can ultimately lead to you losing your home.
We at Liberty Debt Relief believe the best solution is to deal with your financial problems through debt reduction, not debt consolidation. This approach allows you to deal directly with the problem, rather than trying to borrow your way out of the problem.
|
