Therefore, if debt consolidation is a loan, wouldn't that mean that you need to have decent credit to get that loan? However, this sounds like an oxymoron: why do consolidation if you have decent credit? The only answer I can think of is if you've been paying the bare minimum on your debts and would like to pay it all off?
2007-09-02 03:57:52 · 4 answers · asked by freewainwright 2 in Business & Finance ➔ Credit
Ahh but some of these debt consolidation companies do even more than give you a loan. They charge you up front fees.
Some promise to negotiate settlements with your creditors which tends to mean they don't pay till you're way past due then threaten bankruptcy if the creditor doesn't take the settlement. Often they just screw up your credit and don't settle anything.
Shifting debt, especially credit card debt, to antoher loan usually gets people in trouble because they can now run those credit cards back up. People who throw all their credit card debt into their mortgage tend to be the ones who end up losing their homes.
Learning to pay off one debt at a time works better. It teaches how to manage your money.
2007-09-02 04:31:12 · answer #1 · answered by bdancer222 7 · 1⤊ 0⤋
Yes, a debt consolidation loan is a loan, usually secured by personal property or real estate.
Persons do this for many reasons. With poor credit, it sometimes works due to the equity in the property and equity is considered regardless of credit.
Persons with poor credit consolidate to pay off past creditors and raise their score.
Persons with good credit do so normally to get a "blended rate" and make payments more affordable.
Ie: A consumer might have a car loan at 8% credit cards at 9% and a mortgage at 6%.
An example consolidation loan at 7 % paying off credit cards and the car will ease payments in the short term and give them an opportunity to refinance again at a lower rate.
2007-09-02 11:07:18 · answer #2 · answered by Jeff S 2 · 0⤊ 0⤋
Combination of various high interest loans into a single one, it is called debt consolidation. The aim behind debt consolidation is to reduce the payments or the interest rate. You make a single payment toward the loan instead many payments each month. This reduces your financial burden and you can have surplus cash left over. Credit counseling services offer debt consolidation loans. Check out the credentials of the credit counselor and find out if they are authorized by the government.
2007-09-03 08:33:37 · answer #3 · answered by Anonymous · 0⤊ 0⤋
Typically credit cards charge over 20% interest. If you can consolidate your debt into a home equity you might pay only 7% and it could be tax deductible.
2007-09-02 11:05:52 · answer #4 · answered by Nelson_DeVon 7 · 0⤊ 1⤋