Debt Consolidating - Your Options The Pros And Cons

Taking control of your current debt problems can be an overwhelming task. If the choice is to consolidating debt it comes down a couple of options.

Debt Consolidation Loans - If you have assets like a home and can qualify for a lower mortgage rate you can borrow against the equity and structure a loan to get the cash and consolidate the multiple debts. This is often done with owners of multiple credit cards and open balances on consumer purchases where they consolidate the debt by paying off all the current balances then only have one payment each month for the loan.

Hired Debt Consolidation or Consumer Credit Counseling Services – These services can help you get a handle on your financial issues and be your representative to the companies, which you owe money.

The total amount you owe and current financial situation play a part in which option will best fit your needs.Here’s a Quick run down of the pros and cons of each option

Consolidating Debt through Borrowing

Pros

• If you quality for a loan you can quickly eliminate the payments of debt on multiple accounts
• This eliminates any debt collection steps or actions in place
• Reducing the open accounts with a balance can improve your credit rating
• Paying off the debts should not impact your credit rating in a negative way

Cons

• Must qualify for a loan or mortgage refinance
• Your assets like a home are put at greater risk for future loss if payments are not made
• The debt is only restructured not eliminated
• Open zero balance accounts make it easier to fall right back into deeper debt
• You may think your financial house is in order providing a false sense of security

Consolidating Debt through Hired Consumer Credit Counseling Services

Pros

• You should immediately see a reduction of debt collection calls and notices drop
• The current monthly payments on accounts should decrease
• Interest rates and extra fees should stop or be eliminated
• You should slowly learn better money management skills

Cons

• While you work with a Credit Counseling service you will not be able to use credit
• Counseling services only work with unsecured debt and not all unsecured debt will qualify
• Clients must qualify and meet minimums of unsecured debt
• Credit rating may suffer of be impacted negatively

The Best Consolidation Solution For You

Everyone has a money problem – too much or not enough. Each and every person’s financial circumstances are different. The choice you make must be based upon your own personal financial situation, money habits and perspective, lifestyle and belief system. In the end it is not what we believe or think but what is best for you to manage your finances, buying and debt to live a better life.