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The Two Important Types of Debt Consolidation Sometimes debt can just spiral out of control before you know it. Don't get sucked into believing that you are a bad person just because you have fallen behind on your bills. This is the sort of thing that can happen to anyone. Many times it only takes a few life events to totally knock you off of your feet. When one thing happens negatively, it is usually just the beginning of your spiral downward. However, it does not matter how you get into such trouble. The most important thing is that you take the right steps to handle your financial situation. At this point , maybe you should think about debt consolidation. Don't view it as something that other people use once they get into financial trouble. Right now it is probably a good option for you too. Before you rule it out altogether, this article is going to discuss the two main types of debt consolidation. Consolidating Debt with a Loan Although there are those that would advise against it, a debt consolidation loan is a new loan that will pay off your old loan. One of the most attractive features of a debt consolidation loan is that it instantly pays off all of your creditors. You will only be responsible for paying one amount back to the debt consolidation company. This is one payment that no longer requires separate due dates. Also, you will no longer have to worry about numerous collectors calling at all hours of the day expecting payment on a past due bill. There are those that would argue that getting a debt consolidation loan is not the way to pay down debt. First, they claim that you are just getting more debt on top of the debt that you already have. Second, they will argue that the new loan has lower payments because the loan is stretched out over a longer period. Perhaps the biggest argument for not getting a debt consolidation loan says that you are better off just sticking it out with your current debtors and paying them off instead. You are advised not to get a new debt consolidation loan. However, with a new loan you will have a set amount of time to pay off the loan. This is not the case with your regular credit card lenders. It could possibly take you another twenty years to pay off the amount owed because of the high interest rate. Also, the late fees and penalties are constantly being added to the loan balance because you cannot make payments on time. However, with a debt consolidation loan, your monthly payments are lower because the interest rate has been reduced. In addition, your new loan will have a set loan term. This means that you will finally see the light at the end of the tunnel. Most debt consolidation loans have a term of no more than 5 years. This means that your loan will be paid in full at the end of that time period. This is unlike the debt that you have with your current creditors that will take years to pay off if things remain unchanged. Consolidating with a Debt Management Plan In addition to a debt loan consolidation, you can also opt for a debt management plan to eliminate debt. A debt management plan consists of counsellors that will work with your lenders in order to get the interest rates decreased on your current loans. In addition, they might be able to get some of the late charges or fees waived too. This will greatly decrease the amount of your monthly payments. Once a new monthly amount has been determined, you will make that monthly payment to the debt consolidation company. They will pay your creditors on your behalf. In return, you will pay them a small service fee that is included in the monthly payment that you make. Now, a lot of people would argue that you should not pay a debt consolidation company to do what you can do for yourself. However, a lot of people do not have the necessary skills to go about handling this type of negotiation on their own. Also, one of the key things that makes debt consolidation so attractive is that it only requires one monthly payment. This within itself is worth the small amount that you are paying to the debt consolidation company. All in all, whether it is via a debt consolidation loan or with a debt consolidation plan, you should consider consolidating your debts. Empower Network If you would like to join a team and build a successful Empower Network business on autopilot, click here. Curtis Glenn is an internet marketer and member of the Empower Network working online while still having a life. http://www.empowernetwork.com/curtislg
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