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Thursday, June 19, 2014

Resolve your financial stress with debt consolidation

By Kc Mouli

Sometimes it so happens that a person gets entangled in debts because he  had to live beyond his means. That is more or less the case with a lot of young professionals, but at times, the debt can also be caused by other means. They may include illness, injury, accident or an unexpected loss on the job frontier. At times, even personal relationship turmoil can put a considerable strain on the finances of a person. Here the divorce could leave a partner absolutely dry of his fund and saving.

Debt consolidation tips
Out-of-control debt can cause financing costs to "snowball"
All of that causes a person to not being able to pay off his loans that he had taken before the crisis. Another thing that is important here to understand is that the debt he has gotten himself into will continuously increase his stress, subsequently his capacity to respond to the problem is going to be affected. In such a situation consolidating the debt would be a good idea.

Here finding a good loan to repay the existing loan is something that everyone looks out for. However, the process is not going to be easy, as the credit report already shows a good lot of liabilities to attend to. But the stress busting loan could be sought with some effort. These are meant for unsecured loans, which mean the amount that has accumulated due to gasoline credit, store credit, credit card, and medical bills may be included in this category.

What are unsecured debts and how they are different from secured debts?

These are specifically those kinds of debts that need no equity pledges. Here grocery bills, insurance payments or utility bills do not come within this category. While secured debts are the car loans, mortgages, boat loans, property loans etc.

How liability consolidation loan helps?

It is very evident to note that while one gets a liability consolidation loan, his store cards, credits card and gasoline cards would be immediately terminated. In a way, one can’t use the “card” after he has cleared its dues; with the liability consolidation loan. He may however, be rest assured that now he won’t be charged the interest over the due that he had on his cards. This way, he will start saving a good deal of money and he has to deal with only one agency; rather than many at once.

On the side, it also aid in making the credit report stronger than before. When a person clears his dues on unsecured debts, it clearly underscores the fact that he could be trusted with a grant of secured debt as well. A small move could help him gain a profound financial backing in terms of a fine credit report.

What should be kept in mind while seeking liability consolidation loans?

Since these loans could come from a single source, the calculation of reimbursement will be simple and stress free. However, while seeking a liability consolidation loan, it is advised that the applicant go through each and every word in the terms of agreement; as well as interest rates. It is vital that all the details in the document are read thoroughly and well-understood.

One must never allow a promise from unscrupulous financing agency that all the interest rates would drop to a lower rate, after the applicant makes his first payment. Do go through the entire document and see if this suggestion is there in writing or not. If it’s not there, then it is certainly a false claim and the agency is lying. Under no circumstances that agency shall be trusted.

Final word of advice

Although this backup loan is taken to clear many small loans, but it would be advisable if the interest rates are calculated properly. It shouldn’t happen that the liability consolidation loan is making the debtor pay more interest than his actual loan.

About the author: Kc Mouli is an expert in Debt Consolidation . He also writes for major finance magazines and journals.
Citations: Debt consolidation
Image: Jayson Shenk, CC BY 2.0
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