For a family that is experiencing economic difficulties every month, bill-paying can be an emotionally devastating time and a loan consolidation service may seem like a great answer to get rid of that anxiety. Conscientious individuals have a careful track record of meeting obligations in a timely manner and, because of their financial histories, they have very good to excellent credit ratings. When such individuals overextend themselves, they are embarrassed, frustrated, and sometimes panic because of the fear of doing anything that will lower the credit score they have worked so hard to achieve. Consolidating all the indebtedness may seem like a great idea for lowering the monthly commitments as seen in the example given above. One of the psalmists wrote that: "My mouth shall speak of wisdom; and the meditation of my heart shall be of understanding" (Psalm 49:3). Before consolidating debts in a panic, consumers should take a good, long look at spending habits and the family budget. Though consolidating debt through a loan consolidation service may have the temporary purpose of lowering monthly expenses, that relief comes with a price. The overall total of the debt with interest will most likely be more than the combined total of the current debt situation. Thoughtful consideration of the actual financial picture may show other options.
Consolidating debt with a loan consolidation service has a common drawback overlooked by many consumers. Except in those rare cases where overwhelming debt is caused by some kind of emergency, the indebtedness exists because the consumer is living beyond his or her means. Consolidating debt lowers monthly payments, true. But what happens when the consumer doesn't change his or her financial behavior? If the credit cards get maxed out again instead of cut up and the accounts closed, the consumer will be faced with the consolidated loan and additional debts. This is perhaps the primary reason why consumers need to carefully consider the budget, how they got into the poor financial situation now facing them, and what can be done to change the situation. Conservative financial experts recommend that consumers tackle debt problems according to a specific, written plan rather than utilizing a loan consolidation service that may only create more financial problems in the future. Again, most consumers have difficulties facing the reality of having to miss monthly payments on credit card or other debts. But a credit card score that goes down is only a temporary problem. Steps can be taken to raise the score back up again when the financial situation improves. And since overwhelming expenses are the cause for the financial anxieties, the consumer should not be taking on additional debt; therefore, the credit card score doesn't really matter. That rating is most important when making a large purchase such as a home or a vehicle. Those purchases, if needed, will have to wait until other debt problems are straightened out. Homeowners should especially be wary of consolidating their debts by taking out a home equity line of credit (HELOC) or second mortgage. The danger here is that the house is now at risk if the monthly payments cannot be made. No one wants to lose a home because of a poor decision on repaying credit card debts.
A loan consolidation service should probably be considered only under extreme economic circumstances instead of as a quick fix to overwhelming monthly expenses. However, many college graduates may find it beneficial to consolidate student loans. During college, many students (and sometimes their parents) take out several different loans to pay educational expenses. After graduation, the student is faced with paying back these loans which have varying interest rates and terms. Many financial institutions offer a consolidation programs that places all the debt into one loan with a single interest rate. The student will want to utilize the online calculators available at some of these websites to determine how student loan consolidation can lower monthly payments. Some loans have a fixed rate interest while others have variable rates tied to some index. The student should also be aware that consolidating the student debt may mean a longer term before the complete debt is repaid. A student loan consolidation service may offer special programs, such as reduced interest rates, for borrowers who set up automatic payments through a checking account or who show a track record of making payments on time. Online applications can be completed and approved in a short amount of time. The convenience may outweigh the drawback of a longer term, but the applicant should never sign a contract that penalizes pre-payment of the student debt.
For more information: http://www.christianet.com/debtconsolidation
Source : http://www.christianet.com/debtconsolidation/loanconsolidationservice.htm