| If a consumer is only making the minimum | | | | and missed payments could result in the loss of |
| payments, which do not reduce the principal, a | | | | the asset. Furthermore, an equity loan can extend |
| debt consolidation seems to be an answer to a | | | | the mortgage duration or loan term from ten to |
| prayer especially when there are multiple | | | | twenty-five years depending upon the specifics of |
| creditors, high interest rates, and the tendency to | | | | the loan. |
| juggle payments just to keep the lights and gas | | | | Another disadvantage is the tendency to |
| on and avoid bankruptcy. A consolidation loan can | | | | overspend. Borrowers must be careful not to |
| be the proverbial "balm in Gilead", but consumers | | | | create more debt by starting to use their credit |
| need to be informed; there are two sides to the | | | | cards indiscriminately. Many are lulled into a false |
| coin, both positive and negative aspects to this | | | | sense of security by having only one monthly |
| solution. A band-aid will not heal a broken leg, and | | | | payment and having money remaining afterwards |
| debt consolidation is not a "quick fix" to poor | | | | They make unnecessary discretionary credit |
| spending or budgeting habits. | | | | purchases, irresponsibly create additional debt, and |
| One primary advantage is that proactive debt | | | | demonstrate poor budgeting and spending habits |
| reorganization can help to raise the credit score | | | | that caused the problem initially. |
| over time. A high credit score will ensure a lower | | | | Consumers must make wise, educated, lender |
| interest rate if the consumer is considering | | | | choices to prevent this remedy becoming a |
| purchasing a home in six months, for example, | | | | disadvantage. Many small lenders will sell the loans |
| and will result in saving thousands of dollars over | | | | to other lenders who may not be conscientious or |
| the duration of the loan. | | | | conceivably unscrupulous. The result may be a |
| A simplistic example is the client doesn't have to | | | | higher interest rate or an escalation clause that |
| literally throw bills up in the air and pay the ones | | | | could mean financial disaster. Therefore, the |
| who land face up now and the remainder later. | | | | consumer must choose the lender carefully and |
| With a consolidation, there is a single bill, due date, | | | | wisely read the fine print. |
| and interest rate. Late payment fees and | | | | Debt consolidation is a method to resolve |
| penalties, which can be significant, are eliminated. | | | | excessive debt issues and regain control of one's |
| There is a consequential disadvantage for | | | | finances. However, the consumer must be astute, |
| consumers who utilize equity loans from the same | | | | informed of both the pros and cons or the |
| mortgage companies. They inadvertently | | | | advantages and disadvantages before making a |
| compromise their primary asset, their home. This | | | | decision. Every choice has a consequence. |
| debt consolidation loan becomes a secured loan | | | | |