People struggling with their debt often resort to debt consolidation as the most viable option to manage their debt. Yes, it ideally helps you to manage your debt, making it easier for you to pay and certainly does not reduce your outstanding loan amount in any way.
Most of the people have been benefited by debt consolidation as it helps them to restore their financial health and get their financial lives back on the right track. It helps them to deal with their multiple and overwhelming debts that they have to pay to different creditors.
Debt Consolidation Determining The Possible End Results
As it is, the process is straightforward. It involves a few steps, such as:
- You apply for a debt consolidation loan which is usually a personal loan that can be either secured with collateral or unsecured
- If your application for such a loan is approved, you can consolidate all those loans that you want to even credit card debts into one single loan and
- Repay the loan according to the agreed terms.
This loan coming at a lower rate of interest rate and with lower monthly payments suddenly makes your payments more manageable and more realistic. In addition to that, you are also relieved from the hassle of dealing with multiple creditors and due dates risking missing out on one or a couple.
Therefore, on paper, debt consolidation seems to be the best deal available amongst all debt relief options you can find at NationaldebtRelief.com or any other similar sites.
Know the scenario
However, before you become too excited to apply for such a loan right now, better you go through this entire article to know the actual scenario. The scenario that is sketched above is considered to be ideal but is not guaranteed! This is because debt consolidation works best when everything else works out equally well. However, there are lots of different outcomes possible.
- To understand things in a much better way first, you will need to know that debt consolidation is just a tool and just like all other tools it is you who can make it work in the way you want.
- At this point, you must also understand that debt consolidation in and of itself is not the solution to your debt problems. It will only make your overwhelming debts more manageable and easier to handle. It will simply give you enough breathing room so that you can get your financial life back in order.
- The final outcome will depend on a lot of other things that include the circumstances, your habits, and most importantly, on how well you use this debt consolidation tool.
That means, just the mere existence of this tool itself is not enough. In other words, based on the person who is consolidating, debt consolidation may yield many different results.
The possible outcomes
Ideally, there are five possible outcomes of debt consolidation. Studying these separately will provide you with a better of it as well as allow you to know what you can expect and are getting into right from the very moment you apply for such a loan.
Your application for a debt consolidation loan may be denied right at the outset. This will bring an abrupt end to your dream to consolidating your debt and have a better financial life and future. There are two significant ways of debt consolidation:
- A debt consolidation personal loan and
- A balance transfer credit card.
For both of these, the creditor will consider your credit, and in most of the times, people get their debt consolidation loan application disapproved simply due to bad credit. However, the creditor will also look at all other contributing factors, but typically, your credit history is the primary factor to face a denial from the creditor.
A portion consolidated:
Assuming that the first stage of getting your debt consolidation loan approved is over, focus on the second possible option. You may be able to consolidate a portion of your debt only and not all your existing debts.
- If you have excessively large sums of debt outstanding, simply gaining approval for the debt consolidation loan may not necessarily mean that everything will be taken care of.
- The amount offered as per your credit report and score may not be enough to accommodate all your loans in it.
In such situations, you should proceed with a plan. Prioritize your debts according to the rate of interest to find out which of these are costing you more in interest and causing you more pain. Consider including these in your debt consolidation list.
You may also end up partnering with a scam company and make your debt issues even worse. This is also a possibility since there are lots of such companies out there and all are not created equal. Most of these companies, especially those with alluring ads, are out here to make the most profit taking advantage of your vulnerable position. They will come up with outlandish promises to allure unsuspecting customers like you and run away with their money paid for debt settlement or management putting you in a larger bowl of soup! To avoid such disreputable companies look for signs like:
- Asking for high service fees upfront
- Lack of accountability
- Lack of transparency and
- Lack of paperwork.
Check their reviews at BBB and other sites and research more on their previous track record before you eventually choose one such company.
They say ‘Bad habits die hard.’ If that is the case with you, then debt consolidation is not your cup of tea. To make it successful, you will need to be:
- Curb your spending and
- Change your lifestyle.
If you fall back into your bad habits of irresponsible and impulsive spending, then no one can save you from the debt hole.
Well, if you stick to your plan and are diligent, then debt consolidation can surely make you debt free. This is the last and the best outcome and probably needs no further explanation.