Credit Debt Consolidation – Facts Vs Fraud.

Consider the difference between truth and fiction when thinking about moving your debt to a single location. Considering the downturn in the current national financial situation, many individuals are looking for a way to reduce their own debt load. There are solid, established ways to accomplish this goals, and others which prey upon desires and insecurities.

Credit consolidation can seem like the perfect solution to those who are in debt. These companies have popped up everywhere as have credit repair companies. It all sounds so good. The company rep tells you that you’ll pay them a smaller amount than what you’re currently paying out every month to creditors, and then they’ll use your money to reduce your bills. However, if you run a Google search about the credit debt consolidation industry, you’ll find a multitude of sad stories from folks who paid the company and then found that the company hadn’t applied anything towards their debts.

Some credit consolidation companies will show up in a credit bureau report as credit counseling, which is disadvantageous. From a lender’s perspective, this looks just like a collection. This might disqualify you from mortgage financing, among other kinds of financing.

Credit debt consolidation does exist in legitimate forms. Getting a home equity line of credit or a cash out refinance and two very legitimate ways to do this. Another form is to open up a new credit line such as a credit card, with a zero percent balance-transfer option, and roll all of the existing credit card and other debt into this account. This will have the effect of lowering the effective interest rate for a while, sometimes over a year, and can increase the credit score.

By having a single account with a debt balance instead of many, you can improve your credit score. On the other hand, the debt consolidation account will be right at its credit limit, and the lack of available credit will reduce your credit score. Don’t be tempted to pay off your credit cards this way, and then start using the cards and running up their balances again. Once you’ve arranged for debt consolidation, it is a good idea to destroy the credit cards so that you cannot get into trouble with them again.

There are a variety of methods for making your personal debt easier to manage. One source of information is a mortgage broker or bank. They are more than willing to review your finances and make suggestions such as debt consolidation. Debt consolidation can lower your monthly payments and may be the best way to avoid debt collectors, foreclosure, or even bankruptcy.

Here are the facts of credit debt consolidation and compare it to the frauds! With the current downturn in the economy that we have all been experiencing, reduction of personal debt is of course a hot topic for most Americans across the country! While there are some pitfalls to be concerned about, there are a lot of legitimate ways to consolidate debt. Credit consolidation can seem like the perfect solution to those who are in debt. These companies have popped up everywhere as have credit repair companies. It all sounds so good.

- Bruno Auger

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