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The Basics of Debt Consolidation

Author: Jason Hahn Author Ranking Blue | Posted: 07-04-2006 | Comments: 0 | Views: 354 | Rating:  (53) Article Popularity - Blue (?) Got a Question? Ask.
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Accumulating debt is very easy nowadays, which makes debt consolidation that much more important to the everyday consumer. The basic idea behind debt consolidation is that a consumer takes out one loan in order to help them pay off a number of other loans. The advantages of consolidating debt include a lower interest rate that is often secured, and the simplicity of dealing with just one loan instead of several.

A first word of warning is to steer clear of debt consolidation companies. These are the ones that run commercials promising debt help despite your poor credit. They will charge application and handling fees that other sources of help would not charge, and will oftentimes charge up to 23% in interest, which would be reflected negatively in your credit rating.

Credit cards often charge high rates of interest, which makes them a popular candidate for debt consolidation. In this case the process is relatively simple. If you hold several credit cards with high rates of interest, you can simply transfer their balances to a single credit card with a lower interest rate. Many times you will be able to find credit cards offering a low introductory APR, and oftentimes this introductory rate will actually be 0% for the first six months.

If you are accumulating credit card debt because you are constantly spending more than your actual income, then consolidation will not help in the long run since your credit card balances will inevitably surmount again. As unappealing as it is, you may have to force yourself to look long and hard at yourself in the mirror in order to see that you may have to change your lifestyle and spending habits in order to fully take advantage of debt consolidation. Canceling your newly-zeroed credit cards is a good place to start.

If you are a homeowner then you should look into obtaining a home equity loan. In this case your home will act as collateral. So long as your loan is not more than the value of your house the interest on the loan will be tax deductible. Remember that if you default on this loan, it is very possible that you will lose your home.

In other cases of debt, you can find help at your local bank or credit union in the form of a secured or unsecured loan. The difference between the two is that a secured loan requires you to put up property as collateral, while an unsecured loan does not require any collateral. Needless to say, it will be more difficult to qualify for an unsecured loan.

Debt Consolidation

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Frequently Asked Questions

Obligations to stay
By: Liz | 23-07-2008
We had our housed refinanced in March. Now we need to move out of state. We had signed a paper about living in the house a year. This wasn't planned and we really have a good opportunity. Can this become a problem if we move while the house is on the market? I have money enough to cover the mortgage for over about two years. We hope to sell it soon. Would this be something we just shouldn't mention?

40 year A R M
By: James Logan | 23-07-2008
coWhat does the mortgage bill currently in legislation do for someone with a bad loan to help keep them from foreclosure?

Is no credit good or bad?
By: iamarealperson2 | 23-07-2008
If I have no credit at all, then what do I have to do to establish my credit?

We recently started a large addition to our home ...
By: rgraham508 | 23-07-2008
We recently started a large addition to our home.  We thought we had enough money to complete the work, but now we are about 80% done and are almost out of funds.  We want to refinance as we had about $200,000 in equity before the remodel and will have substantially more than that after.  What are the lending guidelines? Thanks, Rob

Bankruptsy?
By: moneta | 23-07-2008
I have 2 morgages and can't sell one house, Bankruptsy?

Is there a questionaire for us that allows us to BUY STOCKS ACCORDING TO OUR PREFERENCES?? ...
By: rsps4115 | 23-07-2008
Is there a questionaire for us that allows us to give our criteria such as, (goals?, NO FUNDS?, MONIES TO INVEST?, ARE THERE DIVIDENDS.? What is p.E. Of bus?, ETC. Etc. Etc.??      And out pops  10 - 20  stocks recm. To buy???   What web site would have such a quiz ??  Aol, google, yahoo, etc. ??  Please send answer to  p.S.S.    Rsps4115 @aol.Com   thank you

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