Consumer debt in the United States has gone up phenomenally during the past two decades and there are yet no signs of decelerating. The total consumer debt in the U.S.A. is about to hit $4 trillion by the time 2018 comes to an end, as per an analysis of the reliable and trusted Federal Reserve data as discussed on https://www.lexingtonlaw.com.
In this context, we know that years of extremely low GDP and a sluggish, almost inactive economy has ultimately taken its toll on the financial well-being of the Americans. Today, the actual cost of living seems to have outperformed and overtaken income growth by almost 10 percent making things far more difficult and almost impossible for the average Americans to lead a life without financial issues and crisis. Moreover, we know that today, banks have strategically become more generous and are making it easier for the average people to obtain credit and that is culminating in more debts for the consumers. Are you suffering from financial crises because of overpowering debts that you are not able to control? In the case, you are finding it extremely overwhelming to manage your debts effectively and eliminate them; you may opt for debt consolidation.
However, according to https://www.forbes.com, “there is a big risk to using a debt consolidation loan. Once you pay off your credit cards, you will be tempted with a lot of newly available credit. If you got into debt because you spent too much money on credit cards, creating more spending power on your credit cards can be a dangerous strategy.” You simply cannot get out of debts by borrowing money all the time. However, the efficacy of debt consolidation in eliminating ever-mounting debts cannot be undermined or denied.
Debt consolidation would be allowing you to go on combining multiple debts or different balances owed by you into one single solid monthly payment at one interest rate. We understand that debt consolidation could ease your debt burden phenomenally and assist you in repaying all your debts in a more attainable manner. However, there are certain debt consolidation facts that you must know and consider before opting for it.
Reasons for US Consumer Debt
You must explore the reasons why Americans are in a financial mess perpetually & why is there any need for consolidating your debts? Many people actually are reeling under the burden of ever-increasing debts because of inadequate income for catering to their everyday needs and expenses. Moreover, Americans do not believe or have any savings. They are perpetually unprepared for any unanticipated emergency expenditures. As the actual cost of living has outperformed the real growth of income, it has become the norm to be cash short each and every month.
Moreover, many people do not know to do proper budgeting. As such overspending and following a lifestyle above their means seem to be quite a common occurrence. When this cycle starts every month credit card debt would be going up thus, consumers would be dragged and pushed closer to insolvency. Once consumers start running out of credit, the real crisis starts! You need to master the art of budgeting if you wish to steer clear of debts and stay away from financial crisis.
Unfortunately, most of you prefer waiting until things go totally out of hand. During this critical phase, your available options would be limited and there is less likelihood of any positive outcome. Debtors must take the initiate well on time to effectively mitigate debts for facilitating a debt pay off. You could pay off all your debts with effective debt consolidation. You may go through debt consolidation ratings before choosing a debt consolidation company. However, you need to understand a few debt consolidation facts.
Debt Consolidation Will Not Completely Erase All Your Debts
Debt consolidation would be helping you in combining multiple balances effectively into one single simple payment. This could be effectively lowering your rate of interest and helping you in making all your payments really more manageable. But debt consolidation is not a quick or a simple fix for erasing the owed debts. It fundamentally involves bundling multiple debts into a single new loan which could be used effectively for paying off your existing debts.
Debt Consolidation Implies Getting a New Lender
Debt consolidation is generally done through an efficient third-party system. Once debt consolidation is done, you do not need to make payments to the lender. You would require paying the debt consolidation company or the agency you have chosen to work with who would, in turn, pay your creditors. The debt consolidation company generally maintain positive arrangements and relationships with your creditors and financial lenders, thus, you get the benefit of lower interest rates.
You May Be Deprived of the Advertised Interest Rate
You must be realistic in your approach and must appreciate that the advertised rate of interest may not be enjoyed by you if you are not having a great credit score and credit history. Moreover, some enticing rates are available to you for a limited period of time. You must do thorough research and a meticulous comparative analysis before opting for the best possible deal.
You Must Necessarily Stop Accumulating Debts
If you wish to get approved for a debt consolidation loan, you must refrain from unnecessarily accumulating more and more debts all through the repayment process. You need to close your accounts when you have repaid your debts.
You Do Not Have the Option of Consolidating Private and Federal Student Loans Together
Remember you can consolidate all federal loans together. You have the liberty to consolidate all your Federal student loans once you have left school or have graduated. In case you are having private loans alongside, you would be required to consolidate your private loans together or even refinance them separately. You must remember that if you opt for refinancing the federal student loans, it would automatically imply that you would no longer be entitled to any loan forgiveness programs.
You must never forget these important debt consolidation facts while consolidating all types of debts including student loans or credit card debt. You must always consult a highly-skilled and reliable debt consolidation expert. After comparing loans, you may think in terms of determining the most effective way of reducing your debts. You are the best judge of your financial scenario and so you would be in the best position to determine your precise goals and aspirations and how best to accomplish them.