Debt Consolidation Blog

Debt consolidation is sadly becoming a way of life for many Americans.

Federal Reserve Figures released for the 3rd quarter of 2009 reveal that consumer debts (credit extended to individuals, excluding loans secured by real estate) are roughly $2.5 trillion. With a population of 308 million, that’s a staggering $8,100 per person. Or approximately $11,500 per adult!

Just over one third of this debt relates to revolving credit (typically credit cards) and the rest on “non-revolving consumer debt” (typically automobile loans, and loans for mobile homes, education, boats, trailers, vacations, etc). Average US credit card interest rates are almost 14% at the moment.

With more and more families finding themselves under financial pressure due the recession, job losses, escalating living costs, tight credit control, etc many Americans have turned to debt consolidation to ease their burden.

Debt consolidation is simply a process where several loans are combined (“consolidated”) into one, mainly to switch to a lower interest rate; fix a rate for the length of the loan, or simply to replace several payments with one single, known monthly payment.

You may be surprised by the many alternatives available when applying for a debt consolidation loan. Your bank may lend you money via an un-secured loan. Even though it’s still a loan, you can use the funds to pay back your other debts in full, replacing them with one debt that you can repay in one fixed monthly instalment, instead of making several separate payments. This should generally be suitable if you do not have an adverse credit rating, as banks are currently reviewing their exposures.

Another alternative is, if you own your own home and have sufficient equity, your bank may approve a debt consolidation loan using your property as security. This offers a few worthy benefits. Firstly, you should get a lower interest rate because they have this security if you default. Secondly, it may be possible to repay the loan over a longer period.

Arranging a debt consolidation loan shouldn’t take too long as most financial institutions now automate many parts of the process – often it’s possible to apply online.

After you receive your funds, you’ll be able to repay your credit cards and other loans, knowing that you’ve reduced how many people you owe money to. And better still, you have now consolidated your payments into one single monthly payment. If you stay disciplined and do not increase your debt, there’s no reason why you couldn’t be debt free sooner than you think.

So, if you’re sick of being in debt and struggling to make ends meet, there has never been a better time to consolidate your loans. Hunt around for the right alternative for you, but pay attention to penalties for paying off your loans early and any terms and conditions in the “small print”.

So don’t bury yourself under a pile of uncontrollable debt, consider one of the many debt consolidation options available to you.

Articles on this site have been acquired from a variety of sources.  No content on this site should be considered financial or legal advice.

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