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Debt Consolidation Loans - Best Practices for Improving CreditConsumers considering a debt consolidation loan to resolve mismanaged finances need to remember that their debt - even at better terms - is still debt. In addition, they must remain committed to paying off the supporting loan before adding to it and possibly creating a situation similar to the one that prompted the initial decision to consolidate. |
Debt Consolidation - Choosing the Proper InstitutionOnce you've made the decision to consolidate your debts, the next logical step is to find the proper lender to handle the transaction. Since the decision to consolidate has the potential to be an extremely positve life-changing experience, it serves no purpose to jump into a contract with "just any" financial institution. The last thing a person needs, at this point in their lives, is to find themselves saddled with another debt to an unfamiliar - an possibly unreliable - lender. |
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Debt Consolidation - Considering Your OptionsOnce you decide to consolidate debt, there are typically several loan options available to you. It is extremely important that you carefully consider each one of these options. Taking on a consolidation loan is not a small decision nor one to be taken lightly - even if it means relieving yourself of a larger financial burden. The last thing you need when taking on a consolidation loan is to saddle yourself - and your family - with a larger monthly payment than you can afford. |
Consolidate Debt Loan - Improve your CreditConsolidating your debt and obtaining a loan to support that consolidation is one of the best ways to improve your credit and relieve the stress of mismanaged finances. Now, with online brokers and financial institutions so readily available via the internet, applying for a debt consolidation loan is much easier than it was just five short years ago. |
Debt Consolidation Loans - Best Practices for Improving Credit
Consumers considering a debt consolidation loan to resolve mismanaged finances need to remember that their debt - even at better terms - is still debt. In addition, they must remain committed to paying off the supporting loan before adding to it and possibly creating a situation similar to the one that prompted the initial decision to consolidate.
Todd Mark, spokesman for Consumer Credit Counseling Service of Greater Atlanta, advises consumers to "look at what the consolidation will cost you for the total life of the loan, not just the monthly payment." Although debt consolidation can potentially have a positive impact on one's credit report over time, it can negatively affect your immediate credit score depending upon your situation.
Craig Watts, Manager of Public Affairs for Fair Isaac Corp.( the company that developed credit scoring) states, "Consolidation also can hurt your credit score if it involves a credit card, home loan or line of credit. Debt consolidation always has an effect on the credit report, so it always has an effect on the credit score." Ultimately, the manner in which you treat your consolidation loan - as well as the condition of your credit report going in - will decide how your score will change and in what direction.
One way to calculate the affect a debt consolidation loan could have on your credit is to visit the Fico Credit Score Estimator - available at either Bankrate.com or at the Fico website (www.myfico.com). Be sure to calculate your score both with the consolidation loan and without in order to receive a score you can realistically analyze.
If you're consolidating because you're in financial trouble, liquidate other assets first, advises, Ric Edelman, author of "Financial Security in Troubled Times" advises, "If you're consolidating because you're in financial trouble, liquidate other assets first. You should not have money in assets if you also owe money in debt." Edelman acknowledges that there are three exceptions to this - mortgages, car loans and student loans.
Not everyone would agree with Edelman. Many financial advisors feel that it is not beneficial to use an appreciating asset to eliminate a depreciating asset, and that turning to another source - such as accessible life insurance - may be a better option. Debt consolidation loans work for many - but they do not work for everyone.
There are many options to consider when attempting to get out from under our self-made financial messes. Ultimately, since we are the only ones to truly understand the depth of our situation, we should be wise to choose a method - and it may or may not end in debt consolidation - that best suits our lives and those of our families.