The Truth about
Debt Consolidation
Jeanette Fisher
Times are hard for many
Americans, with interest rates going up, sky high
gas prices, and overall inflation, so it's not
surprising that many families find themselves in
financial difficulty that's frightening enough to
cause them to seek professional help.
When faced with mounting financial obligations, it's
easy to fall prey to any number of the
advertisements you see on television, in magazines
and newspapers, on the radio, or in your email box
on the Internet, promising to either eliminate your
debt altogether--or to "consolidate" your debt.
You need to know the truth
about debt consolidation.
It's a tempting thing to have
a company take all your bills, roll them into one
package, and then have you pay them off with one
lump monthly payment, often less than the combined
total of your individual bills. But let's look at
what's really involved. The pitch is that debt
consolidation companies will reduce your monthly
payment on what's known in the industry as UNSECURED
DEBT, which includes credit cards, utilities, or
anything else you bought that wasn't secured by a
piece of property that could be foreclosed upon by
the lender. Your home mortgage, on the other hand,
is a secured debt, which is the key to how debt
consolidation companies function.
When you contact a debt consolidation company, the
first thing you'll find yourself doing is answering
a number of questions concerning your home--how much
equity you have, your monthly payments, how long
you've been in the home, and other things. Since
your home mortgage can (and often is) the largest
monthly payment you have, you might be lulled into
thinking that they're merely asking in order to add
your house payment into your monthly debt total.
However, there's something potentially ominous
behind those seemingly innocent questions. The
company is asking questions about what's generally
the most valuable asset of a family--their home.
Why? Because their plan is to combine all your
unsecured debt and turning it into SECURED debt--by
tying it to your home.
There are several potential dangers involved in
that. First, if you find that you can't make the
new, lower payments in the future, you'll find
yourself not only continuing to have bad credit
(which is something that you could ultimately live
with, even as difficult as it would be). But you
could actually find yourself losing your HOME, as
well--a situation that could be life-threatening!
But debt consolidation companies say they can lower
your monthly payments by a significant amount, and
that's why you sought their help, right? Well, your
must understand that the debt consolidation company
won't lower either your overall debt load or
interest rates. What they'll do is extend the life
of your loans by transferring them from short-term
(1-3 years) into long-term loans, which can take as
long as 30 YEARS to pay off. You may lower your
monthly payment, but you'll be paying up to THREE
TIMES as much for those things you owe money on--for
DECADES to come!
So, regardless of how much debt you're faced with,
be smart, and before you sign with a debt
consolidation company, ask them EXACTLY how they
plan to help you, how long it will take to pay off
your debt, and what they'll get out of it, since
they're in business to make money, just like every
other company in the world.
The book,
Credit Help!
contains an entire section on how to get out
of debt. The book costs much less than debt
consolidation companies.
Read about how to get out of debt for life.
Copyright
©
Jeanette J. Fisher
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