Pros and Cons of Debt Consolidation Services

You are one of the millions of Americans that have debt. Whether it is a couple thousand dollars, or tens of thousands, you just want to pay it off and get rid of it! However, if you had the money to pay it off, you would not be in debt in the first place. You are sinking into a bigger hole of debt and bad credit. You need debt services in order to achieve relief.

When you have debt, you owe the creditor. Of course, your debt amount is not your initial investment you spent, but an accumulation of principal, interest, and fees. Therefore, you have to pay back more than you took out to begin with. Since you needed help financially in the first place, it is extremely difficult to pay back that, plus more.

Debt settlement is always an option for getting out of debt. It is when your past due balances are negotiated at a lesser rate, which reduces the overall burden of what you owe. You may be able to pay half of what you owe if you can do it as a one-time payment within a short amount of time. If this is not possible, you might be able to pay a third in a couple of payments. Sometimes your interest rate is lowered in order to catch up on the past due balance. It is really up to the creditor as to what the company can offer and accept. Another service is known as debt relief. This means your debt is forgiven either partially or wholly.

Have you ever heard of debt consolidation services? There are pros and cons to using this type of debt program. It is not for everyone, since each person has a unique debt situation. However, it is important to understand the facts before determining if it is the right plan for you.

Debt consolidation puts all of your credit card debt, payday loans, cash advances, unpaid bills, and other loans into one lump sum. It is a form of refinancing that requires you to take out a single loan in order to pay off all the others. You will have one monthly payment, rather than multiple ones. It can also lower your overall interest rate to your entire debt load, since you, once again, only have one loan rather than several.

The new consolidated loan will most likely pay off the debt with the highest interest, first. Since you are dealing with thousands to tens of thousands of dollars, the lending institution will secure your new loan as a second mortgage or home equity line of credit. Therefore, you must put up something for collateral in the event the loan does not get paid off. This may be your house, or anything else that is valuable. Do you see where this might be a problem? If you had trouble managing your bills and budgeting your money before, now you have some serious assets that you might lose in the process if you are unable to make your payments. On the other hand, if you can make your payments, then you can live free of debt.

The biggest advantage of debt consolidation services is the lower interest rate. Your repayment will not only be at a fixed cost, but repayment will be spread over a larger period of time. However, as mentioned before, if you go into default for any reason, your lender has the right to take your property. There are also still costs associated with the loan, such as fees.

The cons of debt consolidation services include the fact that you are nowhere near closer to being out of debt than you were before; you have simply moved the debt. If you do not change your habits, you will be losing a lot more than a credit rating. There is no fast and easy solution to debt. You cannot borrow money to pay off debt; you simply are acquiring more debt.

If you are unsure if debt consolidation services are right for your financial situation, you should consult with a bankruptcy attorney. He or she will have experience in dealing with debt and the legal matters associated with it. If you hire a lawyer, he or she can speak with your lenders and creditors personally, in order to determine what form of debt service is ideal for you. It might be debt consolidation, debt settlement, debt relief, or even bankruptcy. You can trust your local attorney that you know will give you sound advice. If you opt to work with an online company, it might be a scam.