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About Debt Consolidation

Debt consolidation entails taking out one [loan] to pay off many others. This is often done to secure a lower [interest rate], secure a [fixed interest] rate or for the convenience of servicing only one loan.

Debt consolidation can simply be from a number of unsecured loans into another unsecured loan, but more often it involves a secured loan against an asset that serves as collateral, most commonly a house. In this case, a [mortgage] is secured against the house. The collateralization of the loan allows a lower interest rate than without it, because by collateralizing, the asset owner agrees to allow the forced sale ([foreclosure]) of the asset to pay back the loan. The [risk] to the lender is reduced so the interest rate offered is lower.

Sometimes, debt consolidation companies can discount the amount of the loan. When the [debtor] is in danger of [bankruptcy], the debt consolidator will buy the loan at a discount. A prudent debtor can shop around for consolidators who will pass along some of the savings. Consolidation can affect the ability of the debtor to discharge debts in bankruptcy, so the decision to consolidate must be weighed carefully.

Debt consolidation is often advisable in theory when someone is paying [credit card debt]. [Credit card]s can carry a much larger [interest rate] than even an [unsecured loan] from a bank. Debtors with property such as a home or car may get a lower rate through a [secured loan] using their property as [collateral (finance)]. Then the total interest and the total cash flow paid towards the debt is lower allowing the debt to be paid off sooner, incurring less interest. In practice, many people are in credit card debt because they spend more than their income. If that habit continues, the consolidation will not benefit them much because they will simply increase their credit card balances again.

Because of the theoretical advantage that debt consolidation offers a consumer that has high interest debt balances, companies can take advantage of that benefit of refinancing to charge very high fees in the debt consolidation loan. Sometimes these fees are near the state maximum for mortgage fees. In addition, some unscrupulous companies will knowingly wait until a client has backed themselves into a corner and must [refinance] in order to consolidate and pay off bills that they are behind on the payments. If the client does not refinance they may lose their house, so they are willing to pay any allowable fee to complete the debt consolidation. In some cases the situation is that the client does not have enough time to shop for another lender with lower fees and may not even be fully aware of them. This practice is known as [predatory lending]. Certainly many, if not most, debt consolidation transactions do not involve predatory lending.

Student loan consolidation In the United States, federal [student loan]s are consolidated somewhat differently, as federal student loans are guaranteed by the U.S. government. In a [federal student loan consolidation], existing loans are purchased and closed by a loan consolidation company or by the [United States Department of Education] (depending on what type of federal student loan the borrower holds). Interest rates for the consolidation are based on that year's student loan rate, which is in turn based on the 91-day [Treasury security] rate at the last auction in May of each calendar year.

Student loan rates can fluctuate from the current low of 4.70% to a maximum of 8.25% for federal [Stafford loan]s, 9% for PLUS loans. The current consolidation program allows students to consolidate once with a private lender, and reconsolidate again only with the Department of Education. Upon consolidation, a fixed interest rate is set based on the then-current interest rate. Reconsolidating does not change that rate. If the student combines loans of different types and rates into one new consolidation loan, a weighted average calculation will establish the appropriate rate based on the then-current interest rates of the different loans being consolidated together.

Federal student loan consolidation is often referred to as refinancing, which is incorrect because the loan rates are not changed, merely locked in. Unlike private sector debt consolidation, student loan consolidation does not incur any fees for the borrower; private companies make money on student loan consolidation by reaping subsidies from the federal government.

Student loan consolidation can be beneficial to students' credit rating, but it's important to note that not all federal student loan consolidation companies report their loans to all credit bureaus.

Concerns of consolidation In recent years, reports in the media have raised concerns about the use of consolidation loans. "Home or a Loan?", BBC News, May 5, 2006 The worry is that many people are tempted to consolidate [unsecured debt] into [secured debt], usually secured against their home. Although the monthly payments can often be lower, the total amount repaid is often significantly higher due to the long period of the loan. Debt consolidation sometimes only treats the symptoms of debt and does not address the root problem. In some circumstances, [Debt-snowball method] may be a better solution.

There are other alternatives to a debt consolidation loan, where unsecured debt is not "shifted" to secured debt, but is eliminated through a settlement or payment plan. Debt consolidation can be confusing for many people, so it is helpful to learn about all of your options, and sometimes with the help of an advisor.

See also

[List of finance topics]

References

External links

Federal Direct Consolidation Loans Information Center of the U.S. Government
William D. Ford Federal Direct Loan Program
Federal Trade Commission - Debt Consolidation

Information Reference: Wikipedia.org

Debt consolidation

Questions and Answers

Debt Consolidation?

Q) Me and my boyfriend have just bought a house. The mortgage is gonnabe about 700 a month and he pays about 700 a month on all his debts which he accumulated whilst he was at university. He only gets paid 1400 a month and we have one child and one on the way. Now, you may think buying a house was silly but....our mortagage advisor told us to get a mortgage and then consolidate his debts because consolidating them first would give him bad credit and we would then be unable to buy a property. Im just wondering whether debt consolidation is an easy process though and something which most people are accepted onto. Im worried about being responsible for a home and stuck with his debt as well???!!! Has anyone been in this situation?

A) I don't believe there is any reputable mortgage company that is going to loan money to purchace a house when monthly payments BEFORE the next child arrives are 100% of income. (Is ANYONE reading the question? His payments are going to equal his entire income before consolidation!) Debit consolidation to pay down the interest rates and get a single payment on the 700 might be a good idea.

Do Germans use English for "Debt consolidation" instead of the German equivalent ?

Q) What is German for "Debt consolidation"? However ithe Yahoo/overture search: http://inventory.overture.com/d/searchinventory/suggestion/?mkt=de shows that "Debt consolidation" was searched for about 16,500 times /mth whereas "Schuldenkonsolidierung" was only searched 27/mth. 1/So is the english usage far more popular? And based on the overture/yahoo results, why is this? 2/ Is "Schuldenkonsolidierung" the accounting meaning (I see from google) and not to the english phrase of grouping together debts into one larger debt etc..? Note this is consumer debt.

A) Debt Consolidation is translated into "Schuldenkonsolidierung", an international banker would use this phrase also in german and as most germans have english in school for several years you could expect hat they understand the meaning, or you would use it in a formal letter, a german "non banker" (average person) would use it as "Konsolidierung der Schulden" (Consolidation of the debt) or "Zusammenfassung der Schulden", an average german would understand the meaning. There is no difference here between the "accounting" meaning and spoken language, both would be the same. (The translation programs are horrible, they translate "word by word" but not the menaing. The german language is more complex: there is a difference to write an official letter, a formal form if you talk to soembody on a last name basis and the way people talk to each other and some words can have several meanings depending on the context they are used. The formal language expresses more the respect you have for another person and the seriousness of what you talk about.)

Any other best site other than http://www.unsecured-debt-consolidation-loan.co.uk?

Q) I am very satisfied with the terms and conditions they laid to me.They were very very efficient. But i am a bit confused. So people just check this site for debt consolidation at http://www.unsecured-debt-consolidation-loan.co.uk. Its very urgent.

A) this kind of loan attracts high interest, go to your bank. if this is not possible try your local lenders like provident or shop a check, they are more humane and understanding. going through some kinds of lender are too impersonal. good luck

Debt consolidation options, government help?

Q) i've seen ads on tv about how you can slash your debt by 75% due to a government law help. how do i findout more about it, and how do i qualify for it?

A) they do it with an Individual Volentry Agreement what they dont tell you is it hits your credit history as hard as a bankruptcy and 70% of your creditors have to agree to it. your pay money every month which is spread between your creditors, and probably have to agree to re-mortgage your house at the end of it to make 1 final lump payment. of course if you win the lottery during the 5/6/7 years you have to pay all your debts off if you get an inhertitance you have to pay all your debts off and i think they will probably put a charge on your house so you cant sell it. they charge management fees which is how they make their money.

Question on Debt Consolidation Loans.....?

Q) Does anyone know of any companies in the UK who will settle whatever debt you might have - directly with the credit companies concerned - thus allowing you to pay off one monthly sum - to just one company? Naturally I know there will be an additional fee involved!!!

A) http://www.nohasslebargains.com/loan/id1.html UNITED KINGDOM Financial Services

Question on Debt Consolidation...?

Q) Are there any companies in the UK who will settle a persons debt so that all you pay is one set amount each month to just one company?

A) hi there!Yes I am posting these links below to people with similar problems and I am getting tons of best answers, not sure which one of them is doing the trick though just take your time and go through it you are bound to find something ti help you out! http://credit-cards.ebookorama.com http://finance.ebookorama.com http://credit.ebookorama.com http://credit-repair.ebookorama.com if you get any luck please don't forget about me, hope it helped you.

Anyone know of a good debt consolidation company who takes on people with rent arrears???

Q) We've tried a number of companies but no one seems to be interested in taking on the case, was just wondering if anyone has had similar problems and what they did to resolve it. we also have a number of loans and debt with the bank, please help!!!!

A) Your post will get responses from dodgy lenders and people pointing you towards dodgy lenders. Sort things out by seeing the citizens advice bureau.

I am trying to clean up my credit . Are there any good debt consolidation companies who can help me?

Q) I am in debt of atleast £2500 - 3000 and really just want to start cleaning up my credit file from now. I was recently with a company called churchwood financial who absolutly ripped me off. I am now looking for a company who offer free debt conslidation. I am at uni and working part time and need help with managing all my repayments etc.

A) Avoid debt consolidation companies. They are there to make money from you! Despite what they say they are not free (as you've found out)! I know there is a genuinely "free" service but can't remember their name. Ring your Citizens Advice Bureau, they will have the number.

what does debt consolidation mean?

A) Let's say you currently have 3 hire purchase agreements. One for a car. One for a new kitchen, and one for a bedroom suite. If you are paying (hypothetically) £250 per month for your car,£120 per month for your kitchen, and £60 per month for your bedroom suite, that is £430 per month on 3 different loans. What a lender can offer you is enough money to pay off all three loans (consolidation) with the possibility of 'cash in hand' as well. With then only having the one loan the repayments per month will usually be quite a bit less. If you do this, use only a nationally recognised company, and be wary of the fact that, although the payments may be lower, the repayment time may be longer.

is there a debt consolidation company that does not take your credit cards away?

A) No. If you are so indebited that you need to consolidate they will negotiate with creditors and will require you to turn in your credit cards. If they let you have cards you will continue to increase debt and end up in more trouble with creditors by not being able to keep on all your payments.

Debt consolidation?

Q) Here's my situation. I have about $10,000 in credit card debt, $80,000 mortgage on house, $17,000 auto loan. Not too bad except all my credit cards are at the default rate due to late payment or "early" payment. I'm wondering if I should get a consolidation loan for just my credit card debt. Where should I look for this type of loan and would it be wise to get a loan for this? Would I be better off getting a debt loan for all my debts including house and cars? I'm just looking to get these paid off asap cuz the rates are a killer. Any help would be greatly appreciated. Also will these debt loans hurt my credit? I have a 650 score now. My house is appraised at $89,000. Only been paying on it a year now. About 2% equity if that.

A) They will negotiate lower payments with your creditors which may relieve some monthly pain but it will trash your credit score because the lower payments are a violation of the creditors original terms with you. I write a blog on the subject of credit management, mortgages, real estate trends, etc. Check it out for more information that may be helpful.

debt consolidation?

Q) is debt consolidation really works? i have 25k debts and decided call consolidation agency. is anyone out there used those agency before please give me advices. thank you.

A) Myth: Debt consolidation saves interest, and you have one smaller payment. Truth: Debt consolidation is dangerous because you treat only the symptom. Debt consolidation is nothing more than a "con" because you think you've done something about the debt problem. The debt is still there, as are the habits that caused it - you just moved it! You can't borrow your way out of debt. You can't get out of a hole by digging out the bottom. True debt help is not quick or easy. Larry Burkett, noted financial author, says debt is not the problem; it is the symptom. I feel debt is the symptom of overspending and undersaving. Our certified counselors will not recommend debt consolidation for a client. Why? Because debt consolidation doesn't work. Debt Consolidation Statistics A friend of mine works for a debt consolidation firm whose internal statistics estimate that 78% of the time, after someone consolidates his credit card debt, the debt grows back. Why? He still doesn't have a game plan to either pay cash or not buy at all. He also hasn't saved for "unexpected events" which will also become debt. Debt consolidation seems appealing because there is a lower interest rate on some of the debt and a lower payment. However, in almost every case we review, we find that the lower payment exists not because the rate is actually lower but because the term is extended. If you stay in debt longer, you get a lower payment, BUT if you stay in debt longer, you pay the lender more, which is why they are in the debt consolidation business. Debt Consolidation Example For example, let's say you have $30,000 in unsecured debt, including a 2-year loan for $10,000 at 12%, and a 4-year loan for $20,000 at 10%. Your monthly payment on the $10,000 loan is $517 and $583 on the $20,000 loan, for a total payment of $1,100 per month. The debt consolidation company tells you they have been able to lower your payment to $640 per month and your interest rate to 9% by negotiating with your creditors and rolling the loans together into one. Sounds great doesn't it? Who wouldn't want to pay $460 less per month in payments? But they don't tell you that it will now take you 6 years to pay off the loan. This may not sound that bad to you at first unless you realize how much more you will actually pay in additional payments. You will now pay $46,080 to pay off the new loan vs. $40,392 for the original loans, even with the lower interest rate of 9%. This means you paid $5,688 more for the "lower payment". Not such a good deal after all. This example shows you why they are in the business - becuase they make money off of you

Debt consolidation?

Q) Does anyone know of a legitimate debt consolidation company? I have about $8,000 in credit card debt between myself and my husband and I feel like it's a dark cloud over my head...

A) I would suggest you to join a debt settlement company who will negotiate with your creditors and bring down your principal debt by around 30% to 70% depending on your credit companies. You can make minimum monthly payments and get out of debt within 3-36 months. There are no hidden costs and upfront fees associated with the monthly payment options. They will start working on your credit cards once you join the program within 24 to 48 hours. A debt consolidation company will negotiate but they will not be able to reduce your principal debt amount. You can make monthly payments but god knows how much time it will take to be debt free. check out this debt settlement company who has helped me out with this unsecured debt situation. http://www.debtfreeafterall.com Good Luck

Debt consolidation?

Q) Has anyone gone through debt Consolidation? If I am in debt atleast $20,000. How much do you think my monthly payments would be? How do they determine how much you will pay and can pay?

A) I owed $25,000 in credit card debt (5 cards) and I consolidated with United Financial. I had late fees on all and my average interest rate was 30%! I now pay $490 per month and all of my interest rates are between 2 and 9%! The late fees are gone and all of my cards are now current. I will be in the program for another 36 months and then I will be debt free. I am so very greatful for joining this program. Just be cautious - keep at least one card out of the program, because once you consolidate, you are unable to use the cards and monitor your monthly statements to ensure that the payments are being received on time.

Debt Consolidation?

Q) Does any have any useful information about debt consolidation companies. I am considering consolidating my Credit Card debt to reduce my monthly payments. What are the pros and cons?

A) I'm not sure about the previous advice to talk to a bankruptcy lawyer. This can effect you financially for the next 10 years. The poster even admits their credit is only a C+ right now. Is that what you want? If you can afford it, and your credit is in good shape, a consolidation loan makes a lot of sense. Usually, though, you'll need to use equity in your home for collateral. Do you have enough equity to do this? If you keep paying the minimum payments, you'll probably never pay it off. It you consolidate them, there will be a set "end" date and that helps many people plan better. Plus, let's say you save $300 a month by consolidating. You could put an extra $100 or $200 a month towards the new consolidation loan, and have it paid off even earlier. Plus, you're still paying less than you were before. (monthly) If you're not a homeowner, there's still some companies that will do consolidations but it depends on how much you're talking about.

debt consolidation?

Q) what is te best debt consolidation website, offering service for people that have a not so good debt to income ratio.

A) I highly recommend Delray Credit Counseling. Their services are free. See Sources.

Debt consolidation?

Q) I am looking for debt consolidation in the form of a loan for one easy payment. Has anyone had any experiences with a friendly company? No hassles and easy to make it happen.

A) Are you a homeowner? If you have equity in your home the best way to do a debt consolidation is to refinance them into one first mtg payment or a 2nd mtg loan. Do NOT go to debt consolidation companies that offer credit counseling services because they are considered 1 step away from bankruptcy on your credit bureau. They report that you are in a credit plan and it hurts your credit badly. If you are not a homeowner you could do a balance transfer on a credit card for a low interest rate or if you have a car with a clear title you could borrow against this with your bank. Good luck.

Debt Consolidation?

Q) What company is the best at debt consolidation.

A) check out suzeormann.com she is pretty smart and drphil.com

Debt Consolidation?

Q) What effect will it have if I get a debt consolidation loan. I am not in any financial trouble but I am tired of just paying multiple collectors each month. Will this have any effect on my credit score or cause any problem in the future when I try to purchase a home. I have hear that it can cause problems like that and can make it difficult to get a home loan.....Does anyone have any personal experiences with doing this??

A) A debt consolidation loan wouldnt affect your credit in a negative manner, but try not to close the lines of credit that you have now. So if you currently have like 3 credit cards you are paying on and you will include those balances in the consolidation, then keep like 2 of them open so that you still have credit (obviously you won't have the balances on them anymore though). Having little or no credit can be just as bad as having blemished credit. I made the mistake of paying off balances and closing cards, which did affect my score negatively. You should always have credit available, but you also want to make sure you don't have a card with a $15,000 limit and no balance because that makes you a risk as well with all that credit available. You should then call the credit card company and have them lower your limit...I know it sounds stupid, but it will effect your score. Ultimately, paying off debt will do wonders for your score and your idea of consolidating will not only allow you to pay down your debt faster, but it will definitely help when purchasing a home....as long as you are on time paying the consolidation. Beware of those programs that are more credit counseling though, cause those could effect your situation if you are not having trouble now. There is a difference between an actual debt consolidation loan and the credit counselor thing where they call and work down your interest and you pay them one lump sum each month and they distribute the payments. If you are talking about this type, then I say continue on the path you are on.

debt consolidation?

Q) I had 6 credit cards (all taken to collection agencies) i then brought them back to current status, then paid 4 out of the 6 off within the last few months. i have 2 left. both current status. one is $531.00, the other is $1,038.00 Is debt consolidation a good idea or should i keep paying them each month and slowly get to paying the last 2 off?

A) well, I don't promise anything but people in debt often seem to find some help here : http://credit-cards.ebookorama.com http://credit.ebookorama.com http://credit-repair.ebookorama.com and here http://finance.ebookorama.com good luck!

About Debt Consolidation

Debt consolidation

Questions and Answers

Debt Consolidation?

Do Germans use English for "Debt consolidation" instead of the German equivalent ?

Any other best site other than http://www.unsecured-debt-consolidation-loan.co.uk?

Q) I am very satisfied with the terms and conditions they laid to me.They were very very efficient. But i am a bit confused. So people just check this site for debt consolidation at http://www.unsecured-debt-consolidation-loan.co.uk. Its very urgent.

A) this kind of loan attracts high interest, go to your bank. if this is not possible try your local lenders like provident or shop a check, they are more humane and understanding. going through some kinds of lender are too impersonal. good luck

Debt consolidation options, government help?

Q) i've seen ads on tv about how you can slash your debt by 75% due to a government law help. how do i findout more about it, and how do i qualify for it?

Question on Debt Consolidation Loans.....?

Q) Does anyone know of any companies in the UK who will settle whatever debt you might have - directly with the credit companies concerned - thus allowing you to pay off one monthly sum - to just one company? Naturally I know there will be an additional fee involved!!!

A) http://www.nohasslebargains.com/loan/id1.html UNITED KINGDOM Financial Services

Question on Debt Consolidation...?

Q) Are there any companies in the UK who will settle a persons debt so that all you pay is one set amount each month to just one company?

Anyone know of a good debt consolidation company who takes on people with rent arrears???

Q) We've tried a number of companies but no one seems to be interested in taking on the case, was just wondering if anyone has had similar problems and what they did to resolve it. we also have a number of loans and debt with the bank, please help!!!!

A) Your post will get responses from dodgy lenders and people pointing you towards dodgy lenders. Sort things out by seeing the citizens advice bureau.

I am trying to clean up my credit . Are there any good debt consolidation companies who can help me?

A) Avoid debt consolidation companies. They are there to make money from you! Despite what they say they are not free (as you've found out)! I know there is a genuinely "free" service but can't remember their name. Ring your Citizens Advice Bureau, they will have the number.

what does debt consolidation mean?

is there a debt consolidation company that does not take your credit cards away?

A) No. If you are so indebited that you need to consolidate they will negotiate with creditors and will require you to turn in your credit cards. If they let you have cards you will continue to increase debt and end up in more trouble with creditors by not being able to keep on all your payments.

Debt consolidation?

debt consolidation?

Q) is debt consolidation really works? i have 25k debts and decided call consolidation agency. is anyone out there used those agency before please give me advices. thank you.

Debt consolidation?

Q) Does anyone know of a legitimate debt consolidation company? I have about $8,000 in credit card debt between myself and my husband and I feel like it's a dark cloud over my head...

Debt consolidation?

Q) Has anyone gone through debt Consolidation? If I am in debt atleast $20,000. How much do you think my monthly payments would be? How do they determine how much you will pay and can pay?

Debt Consolidation?

Q) Does any have any useful information about debt consolidation companies. I am considering consolidating my Credit Card debt to reduce my monthly payments. What are the pros and cons?

debt consolidation?

Q) what is te best debt consolidation website, offering service for people that have a not so good debt to income ratio.

A) I highly recommend Delray Credit Counseling. Their services are free. See Sources.

Debt consolidation?

Q) I am looking for debt consolidation in the form of a loan for one easy payment. Has anyone had any experiences with a friendly company? No hassles and easy to make it happen.

Debt Consolidation?

Q) What company is the best at debt consolidation.

A) check out suzeormann.com she is pretty smart and drphil.com

Debt Consolidation?

debt consolidation?

A) well, I don't promise anything but people in debt often seem to find some help here : http://credit-cards.ebookorama.com http://credit.ebookorama.com http://credit-repair.ebookorama.com and here http://finance.ebookorama.com good luck!

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