Author Topic: What Debt Consolidation Loan Means  (Read 3069 times)

What Debt Consolidation Loan Means
« on: Oct 20, 2010, 02:25:26 PM »
If you look at the effects of the consolidation loan, even if it will cost you more, it is more convenient to pay for the fact that the monthly payment is reduced. It also gets you out of the complexity of paying to many lenders. Your debt consolidation loan allows you to have a single payment to concentrate on. These are good and legitimate benefits but you have to be careful when taking any kind of loan.
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Steven Jackson

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Re: What Debt Consolidation Loan Means
« Reply #1 on: Oct 20, 2010, 02:35:16 PM »
I would agree that consolidation is a good way of dealing with a debt problem. If you have multiple creditors that can all be paid off with one loan, this will make things easier to manage and it is likely that your over all monthly repayments will be reduced.
 
However, my advice is after taking a consolidation loan you must make sure that you cut up your credit cards and change your spending patterns so that you stick within your budget.
 
I have seen a lot of debt problems get worse after people took consolidation loans simply because they continued to use their cards and these debts built up again.
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Re: What Debt Consolidation Loan Means
« Reply #2 on: Oct 20, 2010, 02:38:59 PM »
Hi Steven, I certainly agree with your observation most of them fails to understand why they need debt consolidation.
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James Falla

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Re: What Debt Consolidation Loan Means
« Reply #3 on: Oct 21, 2010, 04:49:33 PM »
I have seen a lot of people make their debt problems worse by trying to consolidate but then not changing their lifestyle or spending habits. Consolidation can be a good way of dealing with debt, however, the key (as with all debt management solutions) is to set your expenditure budget and then stick to it. That way you can be assured that you will always have enough to cover your reasonable living expenses and the consolidation loan payment and not risk running out of cash and having to turn back to your credit cards.
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solvemybadcredit

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Re: What Debt Consolidation Loan Means
« Reply #4 on: Oct 31, 2010, 01:23:15 PM »
Debt consolidation simply means that you do put all your finances into one loan. You just have to make sure that the payments are going to be lower overall and you can pay off the debt quicker. Also be aware of so called high interest bad credit loans. Always check your credit rating first, to see if you qualify for a personal loan with a lower interest rate.
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Steven Jackson

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Re: What Debt Consolidation Loan Means
« Reply #5 on: Nov 01, 2010, 06:24:25 PM »
Hi solvemybadcredit. There are a number of things you should consider before taking out a consolidation loan. The main ones are whether or not the loan will give you enough to pay off all your debt and most importantly can you afford to pay the new loan payments within your monthly budget.
 
I have seen far too many people take a consolidation loan because they think it will help them reduce their monthly outgoings only to start using credit cards again because they simply can not afford the new loan payments.
 
A good income and expenditure analysis should always be the starting point. Once you have claculated your disposable income, you will know exactly what you can afford to pay each month and whether a loan is a feasible option.
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solvemybadcredit

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Re: What Debt Consolidation Loan Means
« Reply #6 on: Nov 01, 2010, 09:54:25 PM »
Sure, Steven, I am just actually talking about the 40 odd percent long term deals that are locking customers in debt for a long term.  :-\ I do understand that if they are reducing the monthly outgoings it is fine, but you have to think about the long term consequences, too.

In my experience it is usually only possible if they increase the term of the loan, because let's face it: people with credit problems usually do not have much free income left, are usually overspent.

But I do not argue with you when it comes to consolidation loans, it is essential in some cases, and the earlier the process is started the quicker the debt will disappear.
I help people sort out bad debt.
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James Falla

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Re: What Debt Consolidation Loan Means
« Reply #7 on: Nov 03, 2010, 04:22:13 PM »
My belief is that consolidation should always be considered but should only be used to try and solve debt problems if you can put your hand on heart and say that you will then cut up your credit cards.
 
However, even if consolidation is appropriate, the problem is that more often than not it is all but impossible for people to borrow enough at a sensible rate to be able to consolidate all of their debts. For this reason, more and more people that I work with are turning to debt management solutions such as debt management plans and IVAs.
 
I do agree about taking action as sson as possible to deal with debt. Generally the longer you leave the problem just hoping that it will go away, the worse it eventually becomes.
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reign123

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Re: What Debt Consolidation Loan Means
« Reply #8 on: Dec 03, 2010, 11:34:52 AM »
for me, Debt  consolidation loan is not a magic wand which can settle all your debt,  in a moment. They help you by paying just one loan rather than multiple  loans. But sometimes, people fail to recognize its limitations and fall  into more trouble. 

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Re: What Debt Consolidation Loan Means
« Reply #9 on: Dec 03, 2010, 12:09:29 PM »
I think that is well put reign123
 
Consolidation can often help simply because all of the debts are bundled together in one place. For many people, making one payment every month is certainly easier to manage than multiple smaller payments and this alone can help resolve their problem. However as you say, people who are already in debt need to recognise the pitfalls and plan to avoid them before borrowing more money.
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madison85

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Re: What Debt Consolidation Loan Means
« Reply #10 on: Dec 04, 2010, 11:26:18 AM »
What Investopedia says is, This is common among companies or people with credit problems (maxed-outcredit cards, student loans, car loans etc.), who unite all of their debts intoone loan to make greater ease in repayment. In the case of credit card debt,this can often be beneficial because credit cards usually carry ahigh interest rate.

James Falla

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Re: What Debt Consolidation Loan Means
« Reply #11 on: Dec 06, 2010, 09:42:04 AM »
It is certainly true that an advantage of consolidation is that the interest rate on a consolidation loan will normally be far lower than a credit card or catalogue. As such, if you consolidate with a loan, you will normally pay less overall if you stick to simply paying off the loan. However, one of the issues of consolidation is that many people forget to cancel the old credit card accounts. There is then the temptation to use these accounts again and get back into a debt probem.
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