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The Lowdown On Debt Consolidation - Mountain Ridge

debt consolidation

It’s no secret. Funding has been a rising issue for Americans over the last few years.  According to the Federal Reserve, the complete household debt in the United States has shot up to nearly $13 trillion as of 2018. It’s clear to see that U.S. consumer debt is out of control. the average American household has a whopping $131,235 value of debt, while the median U.S. family income was just a measly $59,039. That has led to major credit issues, to say the least.

Credit card debt alone has reached more than $905 billion total, with an average debt amount of $15,662 each family. It's not surprising that delinquency on credit card debt, being at least 90 days overdue, is also on a fast upswing.

Are You Overwhelmed By Debt Like Most Americans?

If you are feeling overwhelmed by suffocating debt, you may be looking for ways to lower your monthly payments or get entirely up from under everything sooner rather than later.  

Consolidating debt can be a great solution, but how does debt consolidation work--and how can you know whether it's a fantastic solution for you and your family?

There are a couple unique ways to consolidate debt, and concerns to be aware of for each.

We'll explore the various debt consolidation options and weigh the pros and cons to help you decide what is best for you and your loved ones.

How Does Debt Consolidation Work?

Debt consolidation is taking out one loan to pay off several nagging debts. It's a standard get-out-of-trouble solution for customers who need relief, especially those who have overwhelming credit card debt and various interest rates.  It simplifies bill-paying and, if done properly, should reduce your monthly payments which can free you up to do other things with your money.

Beware though, while you can consolidate many distinct kinds of loans, the procedure for consolidating student loans differs.

The main challenge of finding an advantageous deal is realizing that interest rates on debt consolidation loans vary tremendously, ranging from as low as 5% to as high as 36%.  

Consumers using debt consolidation loans to pay off credit cards say that they cover an average of 20% interest on these cards.

Whatever method you choose in consolidating your debt should incorporate an interest rate that's half, or less, of that.

So how can you get that down to some single-digit interest rate that makes it possible to pay off debt quicker? The absolute best way is to take the necessary steps to boost your credit rating.

Improving your credit rating also could make you eligible for a zero-percent interest balance transfer credit card. Most likely, lenders would require a credit score over 700 in order for you to qualify for these types of debt consolidation cards.

Kinds of Loans That Can Be Used To Consolidate Debt

There are people who use varying types of loans for the purpose of consolidating debt, this may be an option for you as well. Listed below are some options as well as the traditional debt consolidation loan….

  • Credit Card Balance Transfers
  • Home Equity
  • Personal loans
  • Debt Consolidation

Should You Consolidate Your Debt?

If you're tired of seeing your credit card balance grow each and every month... and the balance has reached levels which are beginning to overwhelm you... and you're tired of the anxiety that it is bringing into your life every month... and you only need a strategy that is easy to follow... then yes, debt consolidation is something you should strongly consider.

Quite simply, if you are ready to turn your financial life around, debt consolidation can help you do just that.

Fact is, you need to be in charge of your money and you need to step away from credit card addiction, you just need a plan.

Debt consolidation is a program, some are even backed by the U.S. government. It simplifies bill paying. It provides you with a very reachable goal to satisfy every month and eventually enables you to breathe free financially. Of course, you need to do some research and comparison, but the essence of debt consolidation may be summed up like this: One affordable payment, once a month, to just one lender.

If you're able to put that on your plate, yes, debt consolidation can most definitely work for you.

What are the Advantages of Debt Consolidation?

Consumers taking out a debt consolidation loan may enjoy several advantages.

These include:

  • Just needing to handle one regular payment instead of many.
  • No need to take care of many creditors.
  • Saving money should you get a reduced interest on the debt consolidation loan in comparison to if you -maintained to paying your existing debts off in total.
  • Decreased stress and distress over your debts.
  • Possible improvements to your credit rating.
  • If you take out a debt consolidation loan with certain lenders they will pay the money direct to your creditors, clearing your debts immediately leaving you with a single loan…

What Could Go Wrong With Debt Consolidation?

Being realistic, nothing is perfect. So, of course there are a few disadvantages consumers should consider when consolidating their debt. Here are some of the possible pitfalls….

Extending the loan duration: Your monthly payment and interest rate may be lower, as a result of the new loan.  But listen to the payment schedule: If it's substantially longer that of your past debts, you may be paying more in the long term.  Most debt consolidation lenders make their money by prolonging the term of the loan past at least the typical, if not the longest duration, of the debtor's previous debt.  This permits the lender to make a tidy profit even though it costs a lower rate of interest.

Jeopardizing assets: It's significantly easier to get a secured consolidation loan than an unsecured one, meaning that you might end up consolidating several unsecured debts (such as credit card balance) to a bigger secured debt.  You could be pledging your property as security against much larger amounts than you'd previously. By way of instance, with a home equity loan or line of credit puts your home at risk if you don't make the required payments.

Losing special terms or advantages: Student loans have particular terms (such as interest rate reductions and rebates), which will disappear if you combine them with other debts.  Those who default consolidated school loans will often have their tax refunds garnished and might even have their salary attached, for instance.

Hurting your credit rating: By rolling over your present loans into a completely new loan, you're most likely to find a modest negative effect on your credit rating at first.  Credit ratings prefer longer-standing debts with lengthier, more-consistent payment histories. Replacing debts before the contract could have called for is viewed negatively.  You also are recorded as having assumed a bigger, newer debt, which raises your risk element. And, of course, just like any other type of credit report, a missed payment on a debt consolidation loan goes on your credit report.

Finding a Debt Consolidation Loan With Mountain Ridge

When you've got a good payment history with the bank, credit union or credit card company, requesting consideration for a debt consolidation loan should be your first step.  If you can get your lender to approve a loan, that is great, but that’s not always the case.

In many cases, your bank might not be excited about keeping you as a customer and your credit ratings might not be high enough to meet their financing requirements.

If you are turned down by your bank or credit union, you can alway search for well-respected private mortgage companies or lenders who tend to be less rigid on rates and credit scores. If you are looking for a great lender, make your way over to Mountain Ridge debt consolidation services.  

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