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For many people the lure of easy credit has taken them into the forbidden zone of debt. Between debt on regular credit cards, shopping store credit cards, home equity lines of credit, mortgages and car payments it's no wonder consumers are finding themselves financially and emotionally drained as they float in a sea of debt.
At a time like this with debt continuing to mount the decision to
use a debt consolidation loan may seem like the smart thing to do - or
is it? Certainly the top financial priority should be to pay off all
outstanding debt. Unfortunately figuring out how to do this and which
debt to pay off first can be difficult at best and even lead to more
financially related stress.
This dilemma is common among
consumers struggling to eliminate debt in order to regain their
financial sanity. A
debt consolidation loan can be an easy answer to
solve the current financial strain brought on by a large outstanding
debt amount but it may not solve the long term issue. The reason is
because many consumers obtain a debt consolidation loan and correctly
use it to pay off their debt. Unfortunately suddenly feeling good about
their new found financial strength they make the mistake of using their
credit cards again and again and again - essentially repeating the
blunders that got them into trouble in the first place. Compound that
with the fact that they now also must pay off the debt consolidation
loan they originally got in order to relieve them of their initial
financial burdens. This is a classic example of where using a debt
consolidation loan could lead to more harm then good.
A better
option would be to pay off their credit cards one at a time starting
with the card that currently has the biggest balance while paying the
minimum amount necessary to all other cards. Any extra money should be
devoted to paying off the card with the highest balance first. Once
that first credit card is paid off then move onto the card with the
next highest balance. Repeat this process until all credit cards are
fully paid off then put all but one in a drawer for safe keeping. Only
keep the one card handy for emergency purposes. Now concentrate all
money that was previous earmarked as credit card payments towards
paying off other bills - perhaps a car or house payment. This option
will only work so long as the original credit cards are not charged
back up again.
If a consumer has financial strength then a debt
consolidation loan can be beneficial for a number of reasons. First it
eliminates trying to juggle numerous bills in various amounts all at
once and instead allows a consumer to focus on paying one large bill.
This saves time, energy and helps to prevent accidentally forgetting to
pay one of the many previous bills which could lead to more financial
charges and stress. The second reason is that a debt consolidation loan
should lower the actual amount of money paid out each month. NOTE - it
may lower the monthly amount but will most likely increase the overall
amount needed to finally pay off all of the combined bills depending on
the terms of the loan contract. Finally it can provide a psychological
boost by relieving an individual of many small bills in order to
concentrate on one larger bill.
Ultimately the choice as the
whether a debt consolidation loan is the right answer lies with the
consumer. Every situation is different and must be treated as such. No
matter what option a consumer takes to eliminate debt if there is no
financial resolve or strength then they will again fall into the debt
trap.
Timothy Gorman provides more loan information and free loan quotes that you can research in your pajamas on his website: Military Loans Online.
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