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Debt Consolidation
Debt consolidation can be considered by borrowers with several credit card accounts and/or multiple lines of consumer debt. A debt consolidation moves the multiple credit lines into a single account with a lower net interest rate than the collective accounts. The company handling the debt consolidation manages the borrowers’ accounts, paying off accounts with higher interest rates first, allowing for greater payments toward principle amounts owed as accounts are progressively paid in full.
There are several areas of risk in debt consolidations, many of them due to the volatility in credit markets as a result of the current economic conditions:
* The gyrations in interest rates, as some are falling while others continue to rise steadily, are a particular concern. As the financial condition of the credit card issuers deteriorated in the second half of 2008, they began raising interest rates on their card holders whether they committed infractions or not. The higher interest rates can lengthen the consolidation process and make it much more expensive than anticipated.
* The biggest change in debt consolidation is that tight credit conditions have almost completely eliminated the option of consolidating unsecured debt using a new unsecured debt instrument as collateral. That leaves secured debt, probably in the form of a borrower’s home as collateral, as the tool that now facilitates the debt consolidation. This puts the borrower in a much more precarious position should difficulties arise in covering the payments on the consolidation. The risk here is that a borrower’s home, if it stands as collateral behind the consolidation, can now be foreclosed.
* If the consolidation did not fix interest rates on the debt rolled in to the consolidation, higher rates could result in a consolidation process that lasts longer than the term of the debt instrument securing the consolidation. Should that happen, replacing the debt instrument could be both difficult and expensive, especially if the collateral behind the debt is a home which has lost value.
The basis for a debt consolidation is the fact that one type of debt is being replaced with another type of debt. If financial predictability and stable conditions reign for the economy and the individual these types of programs can work. The biggest risk now, however, is that deteriorating conditions can put a borrower’s home at risk of foreclosure due to the collateralized nature of today’s debt consolidations. With other options available, that risk may not be necessary to take. Call Debt Settlement Law Office at (800) 466 1845 to see which option is right for you.
Bankruptcy may remain on your credit report for up to 10 years. With debt settlement law office bankruptcy can be avoided and your debt is reduced. Best of all, once your crediors accept our settlements, the amount will be as payment in full, making you debt free without having to suffer the longer-term financial, emotional, and social impacts of a bankruptcy.
With debt settlement law office bankruptcy can be avoided and your debt is reduced.