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Why Should You Consolidate Your Debt?

Apr 6, 2008
Today quite a number of people face problems with financial obligations such as loans. Spending more than one makes living beyond ones means, is easier to do in todays world, with people being egged on by aggressive advertising, the easy availability of low interest loan packages and lines of credit.

The situation has become dire in some places. In Australia, for example, the government is formally looking into the causes of teenage debt and trying to come up with ways to help.

Debt Consolidation Options
There are different ways of dealing with the burden imposed by multiple debt accounts. The debtor can default on the loan, with drastic effects on their credit rating and the asset held as security.

A person with a secured loan like a mortgage might be able to refinance it, or leverage the equity of their property and get a second mortgage or home equity loan. All of these have their risks.

Debt consolidation can be from unsecured loans to secured loans, but more often than not the deal is made with collateral. Failing to pay can mean the loss of the collateral, if you pledged your home, you could lose it, as the lender now has the legal right to dispose of the security in order to make up for their losses.

Advantages of Consolidating One's Debt
There are several reasons why people decide to enter into a debt consolidation loan. One main reason is for convenience. Upon commencement of the loan, the debt consolidation firm will now be in charge of disbursing money to their clients creditors.

This saves a person from having to remember to pay each time their loans collection deadlines roll up and the consequences of forgetting to pay. This can greatly reduce the hassle and stress on a debtor.

Another advantage is that debt consolidation companies can, through their negotiators, sometimes obtain discounts or reduced rates for their clients. Consolidated loans, even unsecured ones, can also offer lower interest rates to the debtor. By paying off only one interest, more money can be applied to pay off the principal, thus completing the loan
repayment sooner and lessening the overall amount the debtor needs to pay.

Another advantage of taking out a debt consolidation loan is that these companies can help clients allocate their money better, plan better budgets, cut expenses, etc. This can help them in the future from getting into financial trouble, but only if they choose to listen.
About the Author
Zulika van Heerden provides valuable information on her site on how to
live a debt free life.
To read more tips and techniques like the ones in this article go to: http://www.globalproperty.co.za
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