What are the pros and cons of consumer credit counselling and debt consolidation?

3 responses to What are the pros and cons of consumer credit counselling and debt consolidation?

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  Philipino Chocol@te

  Comment on What are the pros and cons of consumer credit counselling and debt consolidation? (February 26th, 2011 at 11:14)

  Mortgage Finder

  I would only reccommend doing that if you are truly just over your head and can’t make the payments on your debt. Credit counseling will tell you to stay current on your revolving debt especially car payment and a credit cards because this will help build your credit back up. For the foreclosed property you can’t do anything about that because whats done is done, so concentrate on rebuilding your credit score. Credit counseling would not be a route to go if you can still maintain paying these accounts because they will consolidate your debt, but at the same time get a payment in interest as well. so talk to some of the companies to maybe work out a smaller payment. Good luck

  What are the pros and cons of consumer credit counselling and debt consolidation?

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  Super – Level 5

  Comment on What are the pros and cons of consumer credit counselling and debt consolidation? (March 1st, 2011 at 15:20)

  Free Checking Account

  “The Pro’s and Con’s of Debt Consolidation Loans
  By Wesley Atkins

  You are swimming in debt. You have 4 credit cards maxed out, a car loan, a consumer loan, and a house payment. Simply making the minimum payments is causing your distress and certainly not getting you out of debt. What should you do?

  Some people feel that debt consolidation loans are the best option. A debt consolidation loans is one loan which pays off many other loans or lines of credit.

  I’m sure you’ve seen the advertisements of smiling people who have chosen to take a consolidation loan. They seem to have had the weight of the world lifted off their shoulders. But are debt consolidation loans a good deal? Let’s explore the pros and cons of this type of debt solution.

  Pros

  1. One payment versus many payments: The average citizen of the USA pays 11 different creditors every month. Making one single payment is much easier than figuring out who should get paid how much and when. This makes managing your finances much easier.

  2. Reduced interest rates: Since the most common type of debt consolidation loan is the home equity loan, also called a second mortgage, the interest rates will be lower than most consumer debt interest rates. Your mortgage is a secured debt. This means that they have something they can take from you if you do not make your payment. Credit cards are unsecured loans. They have nothing except your word and your history. Since this is the case, unsecured loans typically have higher interest rates.

  3. Lower monthly payments: Since the interest rate is lower and because you have one payment vs many, the amount you have to pay per month is typically decreased significantly.

  4. Only one creditor: With a consolidated loan, you only have one creditor to deal with. If there are any problems or issues, you will only have to make one call instead of several. Once again, this simply makes controlling your finances much easier.

  5. Tax Breaks: Interest paid to a credit card is money down the drain. Interest paid to a mortgage can be used as a tax write-off. Sounds great, doesn’t it? Before you run out and get a loan, let’s look at the other side of the picture – the cons.

  Cons

  1. Easy to get into further debt: With an easier load to bear and more money left over at the end of the month, it might be easy to start using your credit cards again or continuing spending habits that got you into such credit card debt in the first place.

  2. Longer time to pay off: Most mortgages are the 10 to 30 year variety. This means that rather than spend a couple of years getting out of credit card debt, you will be spending the length of your mortgage getting out of debt.

  3. Spend more over the long haul: Even though the interest rate is less, if you take the loan out over a 30 year period, you may end up spending more than you would have if you had kept each individual loan.

  4. You can lose everything: Consolidation loans are secured loans. If you didn’t pay an unsecured credit card loan, it would give you a bad rating but your home would still be secure. If you do not pay a secured loan, they will take away whatever secured the loan. In most cases, this is your home.

  As you can see, consolidated loans are not for everyone. Before you make a decision, you must realistically look at the pros and cons to determine if this is the right decision for you. “

  What are the pros and cons of consumer credit counselling and debt consolidation?

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  Gillian G

  Comment on What are the pros and cons of consumer credit counselling and debt consolidation? (March 2nd, 2011 at 01:40)

  Credit Report

  There is an article here about debt consolidation counseling which may help you.

  I wish you luck!