Bad debt can reach a point of disaster for the unwary consumer. If debt is creating havoc in your life, get a debt consolidation loan.
What is Bad Debt?
Bad debt is usually defined as unsecured debt, at relatively high interest rates, for purchases which do not have lasting value. Examples of bad debt are credit card balances which have resulted from dining out, vacations, luxury items, etc. Good debt, on the other hand, is debt that is assumed for something of lasting value, such as a mortgage loan on a home. A car loan, moreover, can be considered good debt if the loan is paid off with value still left in the car. When an individual reaches a point of excessive "bad" debt, and when that debt is becoming insurmountable and unpayable, it is time to consider getting a debt consolidation loan.
How a Debt Consolidation Loan Can Help
A debt consolidation loan rolls all bad debt into one loan, with a lower payment than that of the combined payments on the old debts. The goal is to get the debtor back on track, by setting up payment terms which can be afforded and which leave the individual free of bad debt once the loan is paid off. In theory, this can be a life-saver for the person who has allowed debt to get out of hand. In practice, however, other requirements are implied.
First, the debtor must determine what spending practices got him into this situation to begin with. If there is no identification of the causes, then the behaviors will not change, and the continuation of accumulating bad debt is almost assured. A good loan consolidation professional will engage in solid credit counseling, identifying what behaviors must change and developing a plan for these changes.
Second, a long-term plan for developing a budget and staying within that budget must be devised. An ethical debt consolidation professional will assist the debtor in establishing and implementing a realistic budget, so that, once the consolidation loan is paid, the individual may continue a lifestyle which will keep bad debt to a minimum. As well, a plan should be developed for regular saving, no matter how small, so that there will be emergency funds available when needed.
Sacrifice and self-discipline will be required of the debtor. The dangerous debt situation did not occur overnight, and, short of winning the lottery, will not be resolved quickly. It may take a few years or doing without luxuries, but, in long run, being free of bad debt will be well worth the effort. Then, as income continues to rise, the individual is able to pay all bills, save a good percentage, and have money left over for fun.
Wednesday, February 6, 2008
Consolidating School Loans - A Good Option For Every Student
Many of the students and parents find it difficult to cope up with the high cost of educational programs. School loans are of great convenience and significance for students, but the problem begins when time comes to payback. Loan consolidation gives you an opportunity to pay your debts only once in a month at a very low interest rate. This process of loan consolidation merges your multiple loans into one loan and it becomes easy for you to handle one loan instead of too many student loans.
Before deciding to get your school loans consolidate, you should know all the pros and cons of the process. You need to find out everything about it, so you know exactly if it is meant for you or not. Loan consolidation provides you a chance to make your monthly installments long term but at the same time it increases your total loan amount to be paid.
Sometimes the rate of interest fixed can be in your favor but sometimes it can be inconvenient for you. You might face loss if the interest rate in the market comes down to what you have been paying to the lender, as it is fixed and can not vary. In case of private loans the situation is quiet different. The interest rate for private loans is variable, it depends on the market. School loan consolidation is extremely beneficial in two situations:
• When you are already paying a much higher interest rate on credit cards or another type of debt.
• When you are borrowing money at a higher interest rate.
There are several advantages of getting the students loans consolidated, some given below:
1. Your life can be simplified by just paying once in a month.
2. The monthly installments made by the student towards his loan can be reduced by more than 50%.
3. By extending your time period for returning loan you will be paying low monthly installments.
4. It becomes easy to handle your finances because you just have to manage one.
5. 1% of interest rate is further reduced if the student is regular with his monthly payments.
6. To get your loans consolidate you do not need to pay any origination, processing or application fees.
At the same time, there are also few drawbacks of getting your loans consolidate, as given below:
• You forget that by extending your loan period you are adding to the total cost of the loan. The extra time you take increase interest on your loan. You are paying more interest in the long run.
• The interest rate is locked, which means if somewhere in future the interest rate in the market falls below to what you had been paying then you won't be left with the choice of changing, it as it is fixed.
• There is a possibility that the interest rate on your consolidated loan might be higher than the interest rate on your other loans.
• After graduation if your loan has been consolidated during the six month grace period, then you might loose the remainder of grace period.
Consolidating school loans is an intellectual option for students who are facing financial crisis during or after study. The decision of getting your school loans consolidate partly depends on how much you owe, how much you've already paid, and other personal financial variables.
Before deciding to get your school loans consolidate, you should know all the pros and cons of the process. You need to find out everything about it, so you know exactly if it is meant for you or not. Loan consolidation provides you a chance to make your monthly installments long term but at the same time it increases your total loan amount to be paid.
Sometimes the rate of interest fixed can be in your favor but sometimes it can be inconvenient for you. You might face loss if the interest rate in the market comes down to what you have been paying to the lender, as it is fixed and can not vary. In case of private loans the situation is quiet different. The interest rate for private loans is variable, it depends on the market. School loan consolidation is extremely beneficial in two situations:
• When you are already paying a much higher interest rate on credit cards or another type of debt.
• When you are borrowing money at a higher interest rate.
There are several advantages of getting the students loans consolidated, some given below:
1. Your life can be simplified by just paying once in a month.
2. The monthly installments made by the student towards his loan can be reduced by more than 50%.
3. By extending your time period for returning loan you will be paying low monthly installments.
4. It becomes easy to handle your finances because you just have to manage one.
5. 1% of interest rate is further reduced if the student is regular with his monthly payments.
6. To get your loans consolidate you do not need to pay any origination, processing or application fees.
At the same time, there are also few drawbacks of getting your loans consolidate, as given below:
• You forget that by extending your loan period you are adding to the total cost of the loan. The extra time you take increase interest on your loan. You are paying more interest in the long run.
• The interest rate is locked, which means if somewhere in future the interest rate in the market falls below to what you had been paying then you won't be left with the choice of changing, it as it is fixed.
• There is a possibility that the interest rate on your consolidated loan might be higher than the interest rate on your other loans.
• After graduation if your loan has been consolidated during the six month grace period, then you might loose the remainder of grace period.
Consolidating school loans is an intellectual option for students who are facing financial crisis during or after study. The decision of getting your school loans consolidate partly depends on how much you owe, how much you've already paid, and other personal financial variables.
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