When people begin considering debt relief options, many think debt consolidation is the way to go. However, for many Americans, debt consolidation is not the best option for debt relief. To understand why debt consolidation might not be your best debt relief solution, first let’s explore what exactly debt consolidation means.
What is Debt Consolidation
Debt consolidation is actually just a fancy name for refinancing your debts. Debt consolidation companies roll all your existing debt into one loan that you make payments on. In fact, debt consolidation IS NOT debt relief in any way. Just like refinancing your home loan, this can lower your interest rates. But you will still be responsible for paying down all debts – even if they are fraudulent or collectors have used unfair collection practices.
Problems with Debt Consolidation
The first issue with debt consolidation loans is that you’ll still be responsible for making monthly payments. The only difference between existing debt repayments and a debt consolidation loan is a possible reduction in interest rate. However, if debts have negatively affected your credit then you may find your interest rate is higher than existing interest rates from your existing creditors.
Secondly, debt consolidation loans most often require you to take a second mortgage on your home. You have to use your home equity as collateral against the loan. That means that if you have trouble making payments due to an emergency, YOU COULD LOSE YOUR HOME.
If you are able to secure a debt consolidation loan that doesn’t use your home as collateral, it will be an unsecured personal loan. That means your interest rate will be higher – and could even be higher than some of your existing rates.
Debt Relief: A Better Solution
At ACRO Services, we have a better solution for your financial stress and debt issues. We offer a debt relief program that helps you eliminate debts legally and permanently using your rights as a consumer. If you are being hounded by collection calls and need someone in your corner, our financial team is ready to help you!