When it comes to consolidating debt, there are many options to choose from. One of them can be a debt consolidation loan. It can be very easily confused with debt consolidation. Do not make that mistake. They are completely different and the mistake can be very costly.
As was mentioned in the last post, with debt consolidation, a firm is usually hired. The firm will get the required debt and finance information from you. The firm then calls your creditors and negotiates on your behalf. These lower rates are pre-set by creditors. Usually, the firm can negotiate lower monthly payments, lower interest rates, and reduce or eliminate late fees. This allows you to pay one, lower bill and pay off your debts in lesser time. In return for this service, you must agree to pay, on time, the agreed upon lower payment while meeting other living expenses
Debt Consolidation Loan is a cash-out loan from which the proceeds are used to satisfy outstanding debt. It is an option when a borrower wants to include current debts (e.g., credit card balances, car balances, etc.) being paid monthly in the refinance of their mortgage loan. The proceeds of the loan can be paid directly to the bills and the borrower will have one payment (the mortgage payment) as opposed to paying the mortgage payment and various other payments. Usually that one payment tends to be lower than the sum of the payment on the individual debts.
However, some of these debt consolidation loans just end up as interest second mortgages on homes. In the long run, the second mortgages on your home only increase the amount of money you owed. If you put all of your debt on the most precious asset you have, you also put the risk of losing your home for the sake of credit cards or other debts.
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