Most television commercials present a rosy picture of your financial future if you opt for federal debt consolidation loans or unsecured debt consolidation loan for managing your spiraling debts. It is touted as the panacea for all debt-related problems, but does it live up to all that hype? Will it really resolve all your debt-related issues? The answer to this question depends on various subjective factors. Debt consolidation works wonders for some people but is disastrous for some. The key to this is to understand what it entails to consolidate bills and whether this process is suitable considering the state of your personal finances.
Most people believe that debt consolidation companies just lend you the money to pay off all your debts. However, that isn’t really true. A secure debt consolidation loans is usually structured as yet another mortgage on your home. People who have an excellent credit rating can an unsecured debt consolidation loan for school loan consolidation, credit card consolidation loan, or even a personal debt consolidation loan. This is not the case for people with less than perfect credit scores. Very few people actually manage to qualify for unsecured debt consolidation services, and even the amount of loan available is lower than average. The loan amount depends on a number of factors like the repayment capacity of the borrower and his/her credit ratings, but usually the loan amount isn’t enough to cover all the debts.
Most debtors who seek to enroll in a online debt consolidation program do so to get rid of their credit card debt. Secure debt consolidation is like taking on a second mortgage on your home which is liable to be seized by the creditor in case the borrower defaults on payments. If the debt belongs to the unsecured category, filing for a chapter seven bankruptcy can help in discharging the debt completely.
It is important to keep this in mind because most borrowers start out with every intention of making repayments on time but sometimes life can spring some unexpected surprises, so it is better to prepare for all eventualities.
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