Debt Consolidation: What is it and why might you need it?

Debt ConsolidationDebt is a very stressful thing; it can feel like a swamp, sucking you down with a feeling of no way out.  Debt consolidation maybe an effective way out. Combining numerous monthly bills into one consolidation loan with a single payment, often makes dealing with the debt easier.

The interest rate for a consolidation loan is often lower than the original credit card or finance company rates. Your monthly payment amount may be lower and the debt may be paid off faster. If you have something of value such as a car or a home, you may be able to use equity to secure a lower interest rate for a consolidation loan. For instance if you have  a $200 thousand dollar home and your mortgage balance is 120 thousand, that leaves you 80 thousand dollars to use as equity for a debt consolidation loan.

You must be careful, that along with consolidating your loans, that you get your spending under control.  For many people taking out a consolidation loan, simply enabled them to continue their out-of-control spending. Mopping the floor is important – but it must be combined with turning off the faucet, otherwise you are another day older and still deeper in debt.  Seeking out free and confidential advice from a professional Trustee is one of the most effective ways to ensure that what ever decision you do make about debt consolidation, that it will the best long term solution for you. 

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David Smith

About David Smith

David was initially drawn to accountancy because he was 'good with numbers'.
He has been an insolvency professional since 1993.   Soon after he began to work with debt issues he discovered that the most satisfying part of his role was the ability to make a positive difference in other people's lives.   It is the person, not the numbers that continues to guide his approach toward helping others deal with debt issues.


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