Will Debt Consolidation Without a Loan Help You?
Are you struggling with credit card payments and other unsecured debts month after month, and interested in taking out a debt consolidation loan to help pay off your debts? If so, it is wise to compare your other debt relief options - such as debt consolidation (called a debt management plan as well) or debt settlement. These have proven to be helpful to many consumers in reducing and managing their credit card debts, and are popular alternatives to bankruptcy - which has a more serious and longer lasting impact on personal credit.
To explore your debt relief options, request a free debt relief evaluation and savings estimate - at no obligation to you.
Why a Debt Consolidation Loan Can Be a Risky Move
These days, many consumers in Texas apply for debt consolidation loans to help pay off their credit card debts and other types of unsecured debts (such as medical bills, retail store charges, or even utilities). What they are essentially hoping to do is to combine their high-interest credit card and unsecured debts into one, lower interest loan. However, debt consolidation loans pose certain risks, particularly to one's credit:
A debt consolidation loan is a form of debt relief that involves taking unsecured debt and paying it off with funds that come by way of a "secured" loan. Thus, it is generally a loan where you would have typically put up your home or other asset to get approved. If, for any reason, you struggle and fail to make your loan payment, you would have essentially put your home at risk.
Also, in many cases, consumers who get a debt consolidation loan generally end up using their credit cards again and start accumulating new charges. As a result, many consumers have a whole new batch of 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.
Debt Consolidation - A Better Debt Relief Alternative?
Many consumers inadvertently mistake a debt consolidation loan for debt consolidation through credit counseling when, in fact, both options have stark differences and can impact your credit in different ways:
As mentioned earlier, with a debt consolidation loan, the goal is to combine high-interest credit card and unsecured debts into one, lower interest loan. And since it generally means taking unsecured debt and paying it off with funds that come by way of a "secured" loan, you could be putting your home or assets at risk should you default on the terms of your loan agreement.
By contrast, with debt consolidation (through credit counseling), you are typically combining or consolidating credit card and unsecured debts into one, more structured, and more manageable monthly payment made to a credit counseling agency. Some people also refer to debt consolidation as a debt management plan, or DMP.
When you enroll in a debt consolidation program, credit counselors review your finances - taking full account of your debts, income, and other obligations. Once they have a clear picture of your finances, they will typically develop a relief strategy that can help reduce your debts - by submitting proposals (on your behalf) to creditors asking for reduced interest rates, or the waiving or elimination of any late fees or penalties. Creditors that agree to the proposals are placed into the debt management plan.
The goal of debt consolidation is, with a single, more structured, and more affordable payment plan, you can, ideally, reduce your debts sooner than if you continued making the monthly payments on your credit card debts at higher interest rates.
Compare Your Debt Relief Options
If you are interested in knowing how to reduce your debts at a pace that you can manage and at typically lower interest rates - compare your debt relief options - whether it be debt consolidation through credit counseling, or a debt consolidation loan or debt settlement. Request a free debt relief evaluation and savings estimate at no cost to you.