Debt Consolidation

Debt traps often shackle themselves to achieving financial independence. Therefore, many people are trying to avoid debt. But in reality, it is quite difficult to do. In addition to not achieving financial independence, the number of needs often encourages someone to go into debt. Especially those who apply a lifestyle of prestige and luxury but are not supported by adequate financial capabilities must be easily trapped in the endless vortex of debt. Seeing this, a way is needed so that a lot of debt can be resolved, one of which is "Debt Consolidation".

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The temptation of debt is indeed so attractive at the beginning. Getting cash in an instant without getting tired of working seems tempting, especially when you think about it later. This mindset is what often traps someone to dig a hole to close the hole so that they have debts at several creditors. Either credit card debt, or other types of unsecured consumer loans. Some loans with different interest rates often make it difficult to manage.

Debt Consolidation Loan

What is debt consolidation?

Debt consolidation is an effort to combine several unsecured loans into one loan with a larger value or ceiling. Debt consolidation can also be understood as a form of changing the financial structure of debt into one loan to pay off several other loans.

The merger of debt into one larger loan is generally accompanied by payment terms that are more 'profitable' for the debtor, namely a lower interest rate or lower monthly installment payments, or even both. Debt consolidation is a form of simplification of monthly installment payments because the debtor will only pay one installment after other debts are repaid with this debt consolidation loan.

Debt Consolidation Programs and Things To Note

Does debt consolidation provide a solution to get out of debt bondage? Of course, the answer is very relative, because it depends on the situation and conditions experienced by each debtor. However, before being tempted to consolidate debt, it's good to pay attention to the following.

• Debt consolidation is a loan that is refinanced with a longer term or repayment period.
• Extended payment terms signify that the term of the debt will become longer.
• The offer of a lower interest rate is not necessarily a guarantee of lower or lighter debt.
• Debt consolidation does not mean debt relief, because the debtor still should pay installments on new debts for a specified period.
• Debt consolidation is different from debt settlement, both are not necessarily the best solution for debtors to get out of bondage of their debts.

For those of you who are trapped in a lot of debt and have difficulty paying and prioritizing installment payments, debt consolidation can be the only solution. You may think it's okay for the debt period to be longer, as long as the installments that must be paid every month are lower so that they are affordable and not burdensome. When you are facing a difficult financial situation, you may not think long, especially to the point of having to compare the amount of loan accumulation that is currently a burden with the loan accumulation after consolidation.

For some or even most people who are in debt, debt consolidation provides the following benefits.

1. Loan interest rates become lighter.
2. The amount of installments that must be paid every month is lower so that it does not burden expenses too much.
3. Financial management becomes better because loan installment payments are no longer branched but only on one loan.

Some potential disadvantages arise.

• Debt consolidation does not guarantee low-interest rates

It should be understood that many factors influence the decision in determining the interest rate on debt consolidation loans. In addition to the policy of the lender or lender, it is also influenced by the loan's 'track record' or repayment behavior and your past credit score. Although eligible for a low-interest loan, there is also no guarantee that the rates or fees charged to you will remain low.

• Debt consolidation will make the debt period longer

The debt solution is actually to get out of debt bondage faster. However, by consolidating debt, you will extend the term of the debt so that the installment payment period until repayment becomes longer. That is, you can't get out of debt quickly.

• Debt consolidation increases loan accumulation

An increase in loan accumulation means that your debt will be greater than your previous accumulated debt. Indeed, the monthly installments you pay can be lower, but remember that to get low installments the loan period becomes longer. That is, the total you have to pay is greater than your previous total debt. With a longer loan period, the interest costs you have to pay will be even greater.

• Debt consolidation will not write off previous debts

Debt consolidation is just restructuring your debt, not writing off existing debt. With new debt through consolidation, you can indeed pay off previous debts. However, in the future, you still have debt dependents so you must continue to make installment payments every month until the specified period.

Hopefully this information about "Debt Consolidation" is useful for those of you who want to immediately settle debts.

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