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Determining if Debt Consolidation is Right for You

These days, millions of Americans are drowning in an ever rising sea of debt. Consumers are finding themselves facing rising interest rates on loans and credit cards and even as the economy slows down, debt balances are climbing steadily higher. For many people, paying off even the minimum balances is difficult, and barely covers interest payments, ensuring a lengthy cycle of debt as principle amounts remain virtually untouched. For many people in these circumstances, debt consolidation is a phrase heard often. What follows is a brief description of the process as well as what it entails for the average consumer.

Debt consolidation is essentially a service performed by a non-profit or for-profit entity that offers you a new loan as a way to pay off your existing debt. Many debt consolidation programs allow you to make single payments to the company every month, which they will in turn use to pay agreed upon amounts to each of your creditors. Most debt consolidators negotiate with your creditors to reach financial arrangements that are easier for you to repay. This often means reducing interest rates or even eliminating accruing interest on closed accounts.

It is imperative for borrowers to understand that missing even a single debt consolidation payment can result in your creditors rescinding their offers. These offers are made as a gesture of good faith and to help you repay your debts, but if creditors feel that you are not attempting to repay them as agreed, they are free to rescind their newer and more favorable terms. These loans should be treated like any other financial obligation.

Another important thing for consumers to understand is that many debt consolidation companies make claims that they cannot back up or that will only apply to customers with excellent credit. Most people filing for debt consolidation are doing so because they have multiple debts and are likely to have less than stellar credit ratings. This means that they are unlikely to qualify for the remarkably low interest rates offered in commercials and advertisements.

There are ways to obtain low interest debt consolidation even with poor credit however, In addition to finding a cosigner for any loans, many debtors are unaware that they can borrow against the equity of their homes or even refinance their mortgages with extended terms that allow them to get the money they need to pay off debts. While these options are risky for customers who are unable to make all of their payments on time, they provide an excellent way to greatly reduce interest for customers who are serious about getting out of debt and repairing their credit.

Debt consolidation is something that is worth considering for many debtors. Always look into all of your options and understand that you are able to negotiate with your creditors yourself. If you find that this is not working or that you need to be able to make a single monthly payment in order to work towards paying off all of your debts, a debt consolidation program may be just what you need to help you make your way out of debt once and for all and to repair your damaged credit rating. People are starting to understand the importance of a good credit score and how it can affect your life. If you have bad credit and are looking to turn your financial situation around, it may be well worth your time to look further into debt consolidation. With lowered monthly payments and a chance to get out of debt in a much shorter amount of time, these programs may be just what it takes to completely reshape the outlook of your financial future.

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