Debt Consolidation- A Healthy Idea or Not?

Debt consolidation

Given the dynamic nature of the market, there is a certain possibility of reaching a point where the debtor may be in the danger of bankruptcy, insolvency or another fiscal emergency may always linger in the horizon. The options available for a bailout at such point are often limited. This is where the debtor can take a plunge of opting debt refinancing that entitles one to take a single loan to pay off the smaller ones, in other words, Debt Consolidation.

Lending institutes such as Fast Track Debt Relief offer debtors a recourse to repay loans by providing them the option of debt consolidation. The Consolidated Debt is mostly a second mortgage or home equity line of credit. This requires the home to be put up as collateral and the amount of loan being less than that of equity. In certain countries, these loans may also provide certain tax benefits to those who itemize their deductions in case of home equity line of credit.

The perks of Debt Consolidation Programs is that they help consumer consolidate wisely by providing a relatively lower interest rate and helping them pay off debt faster. They can also help the consumers in managing the repayment to minimize the chances of late or missed payments. More often they have a fixed cost to process payments and the repayment can be spread over a longer period. However, such programs may consist of costs such as fees, interest, and points where one point equals to approximately one percent of the loan amount.

Other options to consolidate debt can be ‘balance transfer’ where you can transfer the balance onto a single card with 0% interest for a set time period. It should be taken into account that in such cases the terms and conditions should be read carefully for all the loopholes. In the recent years, peer to peer consolidation is widely used that allows individuals to lend loans to each other. Peer to peer companies help connect people which need loan with ones that can invest a certain amount. This is seen as a win- win situation for the both the parties.

People with numerous debts struggle with higher minimum payments which leads to the domino effect where, you miss payments, interest rate gets raised and you struggle to stay afloat. Debt consolidation can become a powerful tool to help you take control and collate debts that are not tied to an asset. It  helps structure all your debt payments into one single payment thus, helping you keep your head above water.

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