Consolidation Loans Can Leave You Homeless
If you have a lot of debt and you are considering consolidation loans, please stop right there! What we are about to tell you here about debt consolidation and loans is extremely important for your peace of mind and financial security.
It is very common for people with too much debt under their belt to be approached by banks or other financial entities offering debt consolidation secured loans to consolidate your debts. However, you have to be very careful here because this is a dirty trick that can compromise your financial security forever.
For banks or any other entities to give you debt or credit card consolidation loans you need to give them a guarantee. A guarantee is something of great value - a house, car, boat or any other possession that the bank considers worthy - that you possess and will be taken by the bank if you cannot pay the consolidation loan sometime in the future.
For example, if you owe a total of $80,000 from 8 different debt sources, a bank may offer one single loan to consolidate all that debt with the amount of $80,000. But the bank will not give you consolidation loans just like that. You have to put something on the table for them in case you fail to pay the loans sometime in the future. The bank will not care if you have an excellent credit score. They just want a guarantee and in this case it is very likely that you will have to compromise your house due to the big amount of the loan.
Risking your house like that can be the worst mistake of your entire life. You may be able to pay the loan responsibly every month right now, but you don't know what will happen in the next 5 years. You could lose your job, have an accident or some other unpredictable change in your life that could stop you from paying that consolidation loan, and lose your house to the bank.
As you can see, debt consolidation may sound fantastic because you only think about getting rid of your different debts and have only one. But that one big debt can make you become homeless.
The best thing you can do is look for debt counseling. A debt counselor can help you negotiate lower payments and interest rates on your different debt accounts. This way you will end up paying a lot less money for all your total debt.
And this kind of help is exactly what you need to find peace of mind and financial freedom. You can be sure that finding debt counseling is a much better option than taking a big loan to consolidate your debts.
Please keep this in mind from now on. While debt consolidation may sound tempting and simple, they can ruin you and those who you care for. The smartest way for you to get out of debt is by finding the right debt counselor who can help you negotiate your payment amounts, interest rates and debt amounts overall.
Most people use debt consolidation (loans) because they offer a convenient way out of debt. This means that instead of paying 3 or so different creditors charging different rates, you use one loan to pay off the accounts. Then, you are left with a single payment on this loan.
However, to what extent does easy translate into savings? Have you ever thought how much money the firms running those debt consolidating loans are making from your woes? Before you sign on that dotted line, consider all your options.
Often, the cost of the new, secured bundled loans are larger than what you would otherwise have paid. As you well know, convenience comes at a price. When you secure the loans, you run the risk of losing your assets (such as your car, home etc) should you fail to repay the loans.
In the same way, the banks will not be lenient with you. In fact, credit unions are more lenient and understanding in comparison. If your financial portfolio is not strong and you are unable to repay the consolidation loans, the consequences that could follow can destroy your life.
By signing up for these consolidation loans, you will be risking your assets. Banks are unfeeling machines that require you to pay up regularly and in a timely manner. Even if the interest rate on the consolidation loans is lower, the banks will not deal kindly with you. For instance, if you used your house to secure any consolidation loans, you could find yourself homeless and destitute. Similarly credit card debts are unsecured. This means that when you turn them into secured consolidation loans, you are further putting yourself at risk.
Additionally, should you run into further financial difficulty and have to reduce the monthly payments on your consolidation loans, the debt consolidation lender will increase the interest rate and lengthen the repayment term. This will increase your debt load further.
At other times, you may end up accumulating more debt every month. It is easy to go back to your old habits. For instance, because credit will be availed to you after you consolidate debt, you will start charging the credit cards up. This means that you will be unable to pay both the consolidation loans and the new credit card debt at the same time, further complicating your debt consolidation options.
If your credit has a poor rating, you may be required to pay a higher interest rate on any consolidation loans. This may be higher than what you are paying currently on your other debt.