A new type of affordable 15-year mortgage aimed at moderate-income and flawed credit borrowers is getting a tryout by Bank of America and Citigroup.
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Carve Debt Down to Size with a Consolidation Loan
When monthly payments become too high to manage, debtors are frequently looking into debt consolidation services. These services are available in most cities across the nation. They provide relief from the stresses of debt--large monthly payments, high interest rates, and the harassment of creditors.
Loan consolidation occurs when the debtor gets a loan to repay all the current loans and debts. Consolidation loans have a lower interest rate than credit cards, especially if the debtor is already behind on payments. This results in a smaller monthly payment. Smaller monthly payments are easier to make, thus avoiding any further penalties or interest.
If the debtor is behind on payments, the credit score will already be low and the interest rate will likely be very high. A lower interest rate means fewer, smaller payments on the debt consolidation loan. Seven or more payments can be reduced to one smaller payment with proper debt consolidation. One payment per month is easier to remember than seven. This can be a big help to a busy person who tends to lose track of time. One payment is easy to remember. In fact, automatic bill payment can be arranged to make the payment on the same day each month.
Another benefit of debt consolidation is the counseling offered to enable the debtor to better handle finances. Utility bills, entertainment expenses, and unnecessary expenditures are examined and trimmed. This frees more cash to pay the new monthly loan payment, which will be less than the total of all the payments the debtor had before consolidation. Credit counselors also offer advice, seminars, and blogs on budgeting, wise use of credit cards, repayment of debt, and rebuilding credit rating.
Bad Credit Debt
In most cases, when a bank gives a loan, they receive collateral to cover the amount of the loan. Some debt, however, is unsecured, meaning there is no collateral guaranteeing the repayment of the loan. Credit cards and medical bills are unsecured debt, also called bad credit debt.Bad credit debt can be whittled down at a pace that provides breathing room to the debtor and a reliable source of repayment for the creditor. Bankruptcy will ruin a credit rating. If the debtor is already behind in payments, debt consolidation shows a commitment to repaying the debt. Also, debt consolidation companies have a long-standing relationship with banks, credit cards, and collection agencies. They can get a better interest rate and a kinder repayment schedule than an individual can get.
Debt solutions vary from the settlement to the debt consolidation loan to bankruptcy. Bankruptcy should be avoided because it leads to the loss of personal property and real estate. Some bankruptcies require a total liquidation of assets to satisfy as much of the debtor’s indemnity as possible. Some bankruptcies only require a rescheduling of debt. That’s the same thing a debt consolidation service does, without the blemish to the debtor’s credit rating.
A bankruptcy remains on a credit report for seven years. It can impact buying a car, getting a home loan, or even landing a job. Consolidation loan services will not damage credit. Rather, they prevent the tardy payments that lead to raised interest and costly late fees.
Debt Settlement and Management
Debt settlement is another type of relief. In this case, the debtor repays the debt with one negotiated payment. Creditors prefer this to a bankruptcy and are usually willing to bargain. A credit counselor can arrange this type of transaction.
Debt management involves having the creditors lower their minimum payments so the debtor can resume timely payments. A debt counselor can facilitate this sort of relief. Once again, lower payments are preferable to no payments to the bank or creditor.
Debt consolidation, in all its forms, is an effective way to reduce payments and create some room to re-establish timely payments. Online debt consolidation services are abundant. Consumers would be well-served to research any loan consolidation services before using them. A good history is a good indication of the company’s ability and honesty. A debt management company with a history of poor reviews or complaints should be avoided.
The spiral of debt is hard to escape. Debt consolidation offers a way to lower payments, free more spending cash, and rebuild a credit rating. When faced with the alternative of ever-increasing interest rates, frozen credit cards, garnished wages, or foreclosed mortgages, a debt consolidation loan is a very useful tool.
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