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Are You Worried About Your Debts Spiralling Out Of Control? It Makes A Difference To Know The Difference Between The Options Available That Can Help Stop Your Out Of Control Debt In It’s Tracks.

Debt Consolidation vs Adverse Credit Loans

If you are witnessing your credit debt increasing with each month you should sit up and take notice and do something about it soon. The reason why you need to be extra careful about your credit amount and it reaching the credit limit is because these things have a way of creeping up on you. It is quite often that you tend to realize what is happening when it is too late.

You might feel that as long as you can keep paying the rent, keep paying all the bills, keep paying for the groceries and so on, that everything is okay. You are not likely to notice that the credit limit is being reached and the credit available is reducing as the days go by.

It is a fact: you cannot borrow more money from banks and other financial lenders to find your way out of debt. Taking on additional debt to pay off current debt is not only unwise but it is foolish. So, what if your debt bomb is ready to go off? What can you do to win the battle? Debt consolidation is one of the answers that could work best for you.

Let’s take a look at some options for you to overcome your money worries now.

Secured Debt Consolidation

Debt Consolidation Loan – Your own and/or favorite banking institution may be the one who can come to your rescue. Apply for a debt consolidation loan to cover all of your outstanding consumer debt balances to one account. It is likely, the bank will want you to pay an application fee but they may refund this to you when you close on the loan. Depending on whether the loan is secured by property or unsecured like a credit card will determine your interest rate. You may pay 10, 15, even 20 percent or more for the loan. Still, it could be a better deal then making five separate loan payments to five different lenders. Do your figures and work out what is the best option for you.

Debt Consolidation Credit Card – A debt consolidation credit card is a regular credit card which you use to pull together as much of your personal debt as possible under one account. With a nifty balance transfer feature in place you could conceivably transfer every one of your outstanding balances to the new card and have one low fixed rate debt to pay off. This is a particularly wonderful option if the rate stays fixed and if no balance transfer fees are assessed.

Debt Consolidation Equity Loan – Your home could be your ultimate rescue. If you have built up equity in your home you may be able to pay off that $40,000 in consumer debt through the funds obtained via cashing out your home’s equity. Your equity loan may be tax deductible too. There may be special credits that could reduce your tax burden even further.

Debt consolidation certainly makes sense if a significant portion of your after tax income is going toward paying off debt. If you are only meeting monthly minimum payments or are finding that your year to year credit burden is remaining unchanged, then a debt consolidation loan, debt consolidation credit card, or a debt consolidation equity loan may be your answer. Having just one loan provides you with one repayment amount and a clear length of the loan. It offers some convenience to deal with one lender instead of several. You also know that your hard earned cash is going towards paying off your debt, not creating more debt.

Adverse Credit Loans

Revolving credit has a tendency to spiral into amounts that are huge and almost non payable after a stage. The result of the situation is securing more loans to pay up the existing ones. These loans tend to help a crisis situation for the short term but prove to be harmful in the long run since they generally attract extremely high interest rates. These loans, often called ‘adverse credit loans’ are loans that are taken to pay off existing credit card amounts or installments for a home mortgage.

Adverse credit loans that have a high level of interest may be necessary in certain situations, particularly if you need some cash immediately. For example if you are about to lose your home or in case of an accident or a health emergency these loans prove to be lifesavers. In all other cases they need to be avoided.

Another instance that you could resort to such loans is when you are confident of a steady source of income that will allow the slow but sure repayment of the loans. In the case where you realize that you have been taken up the wrong path as far as money is concerned and you are looking at turning a new leaf, you could take the help of these loans to start afresh.

The one thing that needs to be kept in mind is that come what may, these adverse credit loans are risky options to take and can backfire leaving you with a heavier and larger credit at the end of the day if not handled and prepared for correctly. This is also because these loans that have been designed to extract people from the debt trap actually demand a much higher rate of interest.

The idea is not to choose adverse credit loans as the first option to fix up your finances, but to choose it if necessary only as a last option.

Some other options

If available to you, another option for managing debt that you could do in case of an emergency or if you want to start afresh is to borrow some monies from a friend or relative. You could also consider an extension for a debt or take up a part time second job to pay off the unpaid bills.

On a final note….

Get peace of mind today and seek out or apply for the debt remedy that works best not just for now but for the longer term. If getting out of debt is the answer you are looking for, then there is likely to be a debt consolidation solution that will work for you. Where possible, the adverse credit loans should be your last resort.

* Original article revised and edited by Tanya Frazer