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Why Consolidation Is Not A Fix All Solution

Author : Jennifer Quilter

When you're looking for solutions to your debt problems and decide on the option of consolidation, it's important for you to understand why consolidation is not a fix – all solution. It's tempting to look at it that way because of the many things it will do for you, and it is a path out of debt, but it's not as though you do one thing and voila! It's all taken care of.

Consolidation is the act of getting new financing and using it to pay off all of your current bills. You then have this one loan to pay off. There are a number of advantages to doing this. The first one that is true in all situations is that you'll only have this one payment to make each month, which makes it easier to keep track of it all. Another advantage is that you'll be free of your old debts, which makes you free of those collectors that keep calling you. You'll also be able to start over and hopefully keep up with these new payments. In the best case scenario, you'll also be able to get a lower interest rate than you are currently paying. This is particularly true in instances like credit cards or payday loans.

So if it makes all of these improvements, why is consolidation not a fix – all solution? Because you're not getting rid of the amount of money you still owe. You're still going to have to pay all of this off, just with a new financing source and plan. You'll still have whatever damage you've done to your credit report during the time you've been in debt, and you'll still be working towards paying this new financing off.

Once you finish making all of your payments, however, if you have made all of them on time and kept up with things in the time sense, your credit will drastically improve. Despite those past bad marks, you will have started building up new positive marks on your report, and despite the bad notes on the old accounts, you did at least pay them off in the end. The more time that passes, and the more positive accounts you build up over time, the better things will eventually get.

Consolidation loans are not a magic wand, they do not make all of your financial problems go straight away. They do however give you a path to get out (as long as it may take) and can help you get a hold on your situation. It's important to understand all that you're signing up for before moving forward because if you don't understand that it will take time to really make improvements, it will be harder to stick with your plan and make sure you do everything necessary to really move forward.

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Learn more about your options for unsecured debt consolidation and what other options are available when you need to look into debt consolidation and no home to use for collateral.

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Tags:   debt consolidation, consolidation loans

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Submitted : 2011-05-27    Word Count : 509    Times Viewed: 372