Is Debt Consolidation the Only Solution For You?
When you are faced with a large debt and no immediate respite, debt consolidation may be the only solution at home. However, it is equally important to choose the right program to avoid any further losses. They are designed to lessen financial burdens given the fact that the borrower shows some restraint in spending.
Many people wonder whether debt consolidation is really a solution. Before proceeding with any program, always keep in mind that the lesser the payment amount every month, the lengthier the duration will be during which you will be stuck in the vicious cycle and keep paying off those installments. The lesser the amount you have decided to pay each month post an acknowledged debt consolidation, the more interest amount it is going to lead to once the loan ends and the compounded interest keeps growing over the outstanding balance.
If you delay paying today something which you can pay tomorrow, you are only increasing the total amount you have to pay off in future. Borrowers should be wise enough to understand this logic as no lender will explain this. Consolidation agencies’ wages primarily come from interest amount accumulation and they usually try to exploit the borrower’s idea that he/she will give up their binge spending and ensure they start saving immediately so that this helps them in repaying the loan amount ahead of the expected time of repayment.
Though it is extremely difficult to give up one’s spending habits that one has developed over the years, borrowers should also some restraint and start saving seriously so as to make the debt repayments on time and not just stick to paying the minimum amount that has been decided by the creditor. Though the borrower would want to direct all liquid funds for eliminating debt, the wise one would always keep some cash by the side in an event of a financial emergency.
No borrower should lenders completely. Keep in mind that mortgage loan firms and credit card providers are relying on the borrower’s decision to delay payments and keep them extending for the longest time. The fact also remains that each lender will portray every borrower’s outstanding balance as a profitable asset which can be traded or sold off to other money loans.
Irrespective of what the agency representatives say or what the lenders’ text says regarding guiding borrowers to help mitigate debt amount, business framework of lenders is highly dependent on maintaining a continuous debt wheel that somehow pushes the borrower into a vicious loop of financial sorrow and burden. Clickhere to know how you can avoid being trapped into it.
When it comes to credit rating, FICO would always want to see some credit card accounts of the borrower active as this validates their credit feasibility. Closing off all credit card accounts is not a good idea since once has to begin from the start and it is always a tough task to build a robust credit rating from scratch. In an ideal situation, it is always best to carry on with one or may two oldest card accounts or choose those accounts that have the highest balance.