| Using
a bill consolidation program to reduce debt
A bill consolidation program is typically provided through consumer
credit counseling agencies, attorneys or financing institutions,
each having their own agenda. The latter, attorneys and financing
institutions, are for-profit companies, while most consumer credit
counseling agencies are non-profit bill consolidation agencies that
help you reduce debt. You can get free
debt consolidation help and learn more about bill consolidation
from a credit counselor.
Financing institutions typically manage debt through a bill consolidation
loan whereas all debts are paid off with the proceeds of the loan.
In effect, the debts are transferred from many creditors, to one
creditor, and hopefully, as a result, provides the debtor with a
lower overall monthly payment and reduced interest rate.
For some debtors this type of bill consolidation may prove effective,
but for others the end result only compounds their financial problems.
This is because a bill consolidation loan does not always reduce
the debtor's monthly debt service sufficiently, and most detrimental,
requires "security" in order to process the loan, typically
with the debtor's home equity. Should the debtor default, he or
she risks losing their home.
Using funds from a bill consolidation loan, second mortgage, home
equity loan or line of credit to pay off unsecured debt should ONLY
be done when it results in significant savings, and the effect of
it resolves your financial hardship. You should be reasonably certain
that you will never default on the obligation. Otherwise, it is
not practical and financially sound to convert unsecured debt to
secured debt and risk losing your home.
Bill Consolidation To Manage Your Payments
You can use bill consolidation to help you manage your payments
and reduce debt. A credit counselor can explain all the specifics
of a bill consolidation program. With a bill consolidation program
you can learn what you can do. A bill consolidation program is different
that a bill consolidation loan. It can sometimes be confusing, so
talk to a credit counselor to find out the difference. If you decide
to join any type of bill consolidation program to reduce debt, we
urge you to ask as many questions as possible. That is the only
way you can make sure your bill consolidation program works for
you.
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