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Top 3 Reasons to Consider a Debt Consolidation Loan
America is home to more than 20,000 banks, savings and loans associations, credit unions, and other financial institutions. With so many financial services available (i.e., cash loans, mortgages, home equity lines of credit, credit cards, etc.), it’s no wonder the average American is carrying an average debt load of close to $16,000.00. If you’re indeed one of these individuals, figuring out a financial management plan that works to jettison individual debt load, especially in a sluggish economy, can truly be a difficult task. Fortunately for the financial savvy, there are certain measures you can take to solve this overwhelming obstacle. Ever heard of debt consolidation loans? Debt consolidation loan are considered by many financial experts to be a viable option to drastically reduce your personal debt loads. Here are three reasons why:
#3 Avoiding Chapters’ 7 and 13 Bankruptcies
The important thing to remember is that no matter how dire your financial situation, there are options available to ameliorate your financial situation. Perhaps your debt load is well above $30,000 and you feel your only option at this point remains with bankruptcy. Although bankruptcy serves to officially wipe a debtor’s slate clean, studies have shown that people who file Chapters’ 7 & 13 bankruptcies are only slightly better off after the procedure than they were before. In fact, many bankruptcies reaffirm debts, such as a car contracts, and are left with numerous bills to pay. Moreover, participating in a bankruptcy proceeding is a traumatic experience for both individuals and households, and thus shouldn’t be taken too lightly.
#2 Working with a Professional Consumer Credit Counseling Service
Consumer Credit Counseling Services (CCCS) are available in hundreds of communities nationwide. These nonprofit counseling service agencies are promoted by the American Financial Service Association, and are independently owned by different organizations. The primary mission of a CCCS counselor is to keep you out of bankruptcy court. They help accomplish this three ways: 1) By accumulating all of your information and analyzing your overall financial situation; 2) By contacting all of your creditors and requesting interest rate reductions; and 3) By placing you on what’s called a debt management plan (DMP). Even though your situation may appear desperate, even hopeless, credit counselors often find a way to rescue you.
#1 Getting Rid of Small “High Interest” Burdensome Debts
Just as the name implies, a consolidation loan is big loan that pays-off other smaller loans. Its aim is to avoid the collection of small debts and extend the time over which debts can be paid, thus reducing the amounts of regular payments. The benefits of such a loan far outweigh its negative effects, especially in regards to drastically lowering ones interest charges. For example, a consolidation loan from your credit union at 8 percent could pay off any loans that charge more than 8 percent and benefit the debtor. In this same vein, the annual percentage rates (APR) of certain credit cards can get as high as 29.99%.
It's important to mention that there's no financial remedy to what ails the average indebted American. Nonetheless, when you factor in the pros and cons of debt consolidation loans, the main benefits of having to make only one payment instead of many, appears to be a convenience many debtors shouldn’t easily pass up.