The Consolidation Loan Solution

Answer 1

Modern times have been marked by an increasing amount of personal, unsecured debt amongst virtually every demographic. Many men and women find themselves overwhelmed by monies owed to several different creditors and in need of straightforward information on what a consolidation loan is and how it can affect their negative situation. In truth, streamlining your debt is not a miracle, quick fix cure for your financial troubles. What it is, however, is a practical and effective means of regaining control over your fiscal future.

The Explanation

A consolidation loan is a large sum of money (typically in excess of $2000), used for the express purpose of repaying lenders and collection agents and closing your open lines of credit in one fell swoop. This loan is then repaid to the debt-elimination program in which you are enrolled, via monthly payment amounts that you yourself set in order to fit perfectly with your monthly budget.

The Results

The consolidation process effectively stops the downward spiral of your credit history, ending the negative reporting to credit bureaus that can make your credit score plummet in a very short period. While clients enrolled in consolidation programs will see a dip in their scores when they close several lines of credit at one time, this dip can be quickly recovered in a short period by making their monthly consolidation loan payments on time. In fact, you are likely to see a noticeable improvement in your credit score in only a matter of months, as you faithfully make your payments from month to month.

The Cost

When you enroll in a consolidation loan program, you can expect 3 different fees to be a part of your overall agreement. First, most programs (non-profit and for-profit alike) charge a registration fee. Second, monthly service fees are usually charged for services rendered, such as settlement negotiation representation and financial planning assistance. Third, you will pay interest on your consolidation loan, just as you would on any other sum borrowed from a financial institution.

The amounts charged for each of these fees will vary from one organization to the next and you would be wise to negotiate with any prospective debt-relief agency prior to signing on the dotted line, in order to get the best value for your dollars.

Debt consolidation provides a viable solution for a very real problem in today’s culture. Enrolling in a reputable program can put you back on track toward a bright fiscal future.