Consumer Debt Consolidation

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Consumers these days are up to their necks in debt.
Knowing that they may get even deeper, many are searching desperately for solutions.
The most well-known method is consumer debt consolidation.
For anyone considering it, there are plenty of facts to be aware of before signing up.
Consumer debt consolidation seems to be a perfect solution.
A loan is obtained to pay off all bills, and then there is only one monthly payment to deal with.
It is usually a smaller amount than all of the monthly bills have been, and it seems like it will be something easy enough to deal with.
But there are some pitfalls with this type of debt solution.
Consumer debt consolidation loans are almost always home equity loans or second mortgages.
That means that unsecured debt is being converted to secured debt.
Of course, the interest rate appears lower than the high ones on credit cards, but if added up for the course of the loan, they are very expensive propositions.
Also, since the home is put up as collateral, a default could mean a home is lost to foreclosure.
That is something no consumer ever wants to think about, but it is a hard reality.
Another fact about consumer debt consolidation is that the statistics for finishing the program are not good.
Most people default, and often it is because of unforeseen circumstances.
When a loan is obtained, circumstances seem favorable, but a divorce, accident, or illness can create financial havoc.
A job loss and lack of a steady stream of income can really upset the apple cart for a lengthy period of time.
If everyone could predict the future, these things would be accounted for, but of course, no one has a crystal ball.
There are other options to consumer debt consolidation.
Debt settlement and management are two to consider, and both work well in lieu of even bankruptcy.
Rather than secure a loan, a renegotiation of principle amounts is made with creditors.
It usually takes twelve to thirty six months to pay them off, but the option seems so much more sensible than secured loans or bankruptcy.
Debt consolidation does work for some people, and most often for retirees who own their homes.
A small second mortgage can make perfect sense, but for the majority of consumers, it can impede their future financial situation for too many years and is full of too many risks.
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