The result is that the borrower ends up paying tremendously more than what was originally owed, sinking the person deeper into debt.
Having a few hiccups in bill payments may not warrant immediate debt consolidation, however there are a few red flags situations to consider.
One way to reduce interest rates and consolidate payments is to obtain a student debt consolidation loan through an approved Federal Family Education Loan lender.
Student loan consolidations allow for only education-type related loans and are regulated for a set ceiling interest rate.
Debt consolidation is when a borrower uses one large loan to pay off several small loans, which typically include credit card balances.
The drawback to this strategy is that the loan is tied directly to the borrower’s home—if payments are not made, the lender may obtain the property. For those who do not own property, many financial institutions offer a special unsecured loan aimed at debt consolidation.Although borrowers will have the advantage of one monthly payment, many debt consolidation loans often include fees and higher interest rates. Students usually have an innumerable amount of student loans in their name by the time they graduate.Unfortunately, among the credible agencies working to help people with debt consolidation, there’s a sprinkling of companies interested in only adding to a stressed borrower’s frustration.According to MSN Money, borrowers should be leery of companies that offer “easy does it loans” where obtaining a loan is extremely simple despite poor credit.Borrowers should seriously ponder debt consolidation if they have maxed out credit card limits, are unable to make minimum payments, have charges which exceed the ability to pay each month and have mounting late fees or calls from creditors. Borrowers should consider their specific financial situation before selecting a debt consolidation solution. If the borrower is a homeowner and has decent equity in his or her home, a home equity loan is a possibility.
Borrowers can pay off the myriad of credit card balances with the home equity loan and enjoy one monthly payment, typically at a reduced interest rate.