Debt Consolidation Loan - Pennsylvania
If you are overwhelmed with debts stemming from credit cards, as well as other types of unsecured debts (like medical bills, retail store charges, or utilities), you may have considered a debt consolidation loan. If so, you may also be interested in finding out what this type of debt relief involves and what other options are available to you.
These days, your debt relief options include debt consolidation through a credit counseling agency, debt settlement, debt consolidation loans, or even bankruptcy. To find out which option may provide you the relief that you need, here is an overview:
A debt consolidation loan typically involves combining high-interest credit card debts into one, lower interest personal loan. On the other hand, debt consolidation typically involves combining, or "consolidating," your credit card debts into one, more structured, and more manageable payment made to a credit counseling agency to be distributed to individual creditors.
A third option is debt settlement, where you are hoping to settle or negotiate with creditors for substantially less than the actual debt amount. These days, these debt relief methods have become popular alternatives to bankruptcy - which can have a devastating and longer lasting impact to personal credit.
To find out how much you can potentially save when you consolidate your debts, request a free debt relief estimate and savings analysis - at no obligation to you.
What It Means When You Consolidate Debts
The term "debt consolidation" has come to represent a range of debt relief options. However, what debt consolidation (unlike a debt consolidation loan) typically involves is combining or consolidating credit card and unsecured debts into one, more affordable, and more manageable monthly payment made to a credit counseling agency. You may even have heard of debt consolidation referred to as a debt management plan, or a DMP.
When you enroll in a debt consolidation program, you will have a one-on-one with a credit counselor who will review your finances, income, and outstanding debts. Once they have a clear picture of your financial situation, they will typically develop a debt relief strategy that can hopefully lead to a more lenient and more affordable payment plan for you. This strategy generally involves submitting proposals (on your behalf) to creditors asking for reduced interest rates, or waiver or elimination of any late fees or penalties, and a lower monthly payment.
Creditors that agree to the proposals are placed into the debt management plan. As mentioned earlier, the goal of debt consolidation (through credit counseling) is - with a single, more structured, and more affordable payment plan, you can typically direct more of your payment towards paying off the principal of your debts rather than just the interest. Eventually, you reduce your debts at an accelerated pace compared with continuing to make the monthly payments on your credit card debts at higher interest rates.
Benefits of Debt Consolidation
Many consumers, depending on their debt situation, apply for a debt consolidation loan to help pay off their credit card debts. As noted earlier, a debt consolidation loan typically involves combining your high-interest credit card and unsecured debts into one, lower interest loan.
While this may be a smart move for some consumers, getting a debt consolidation loan should not be taken lightly since this type of loan normally requires consumers to put up their home or other asset as collateral. This means that if a consumer defaults on their loan, they could be putting their home at risk.
Also, keep in mind that unlike debt consolidation through credit counseling, getting debt relief through a personal loan typically involves paying off your debts with a new loan. This scenario may present a potential risk for consumers who likely do not have the discipline to stop using their credit cards.
Many consumers who get a debt consolidation loan generally end up using their credit cards again, and "ring up" new, high-interest credit card debts to deal with on top of their loan. Under this scenario, a debt consolidation loan has generally made their debt situation go from "bad to worse."
In comparing a personal loan with debt consolidation, a personal loan may be a smart move for disciplined consumers, however, debt consolidation through credit counseling provides a way to consolidate high-interest debts into a single, more affordable payment plan, and may be a preferred way to pay off your debts on a set schedule.
The bottom line is, no matter how overwhelmed you are with credit card debts, you may be able to find much-needed debt relief and get a fresh financial start.
Request a free debt relief analysis and savings estimate - today. Start by answering a few, simple questions here.