Debt Consolidation Loan

By John Lynch

Getting out of debt is now the great American dream. In days past, it was home or business ownership, but the slippery economy has made many people fearful. Consumers are also in debt more than ever before. The statistics are chilling. Consumers owe nearly $2.5 trillion in debt. That works out to about $8,100 for every man, woman and child in the country. Much of the debt is unsecured credit card debt too.

Credit card companies have made it all too easy to keep charging, and with the tough economy, many consumers have begun to rely on credit cards to provide food and to pay utilities so the debt continues to amass. By the time a person is defaulting or missing payments on these unsecured loans, the situation has become dire. Debt consolidation loans are often the first remedy they turn to rather than consider other means of debt relief.

Debt resolution methods are varied, and while debt consolidation loans are popular, they are also one of the most dangerous routes to take. The concept seems like a good one. Borrow money and pay off all debt, and have one monthly payment that would be lower than the sum of of those different bills. There's only one catch. In order to get a loan like that, it has to be secured. In other words, the borrower has to put up collateral, and that means having a lien against a home, other real estate property or maybe a car. Whereas credit card bills are unsecured loans, the debt consolidation loan is not. Default on it or get too behind in payments, and the lending institution can take the collateral. Losing a home is devastating.

Beyond committing to a debt consolidation loan, there are other options. Debt management and debt settlement are valid methods to gain debt relief, and neither of them require borrowing money. They work through negotiation with all creditors to lower balances and interest rates, and if the consumer is working through a debt resolution company, it results in one monthly payment. The company handles all the work. In the case of either of these options, there are certain qualifications that must be met, but if a person qualifies, it is perfectly possible to be debt free in 12 to 36 months as opposed to the long term debt consolidation loan.

While being in debt is being in the same situation as most of a consumer's friends and neighbors, there's a certain freedom and peace of mind to becoming debt free. Consumers should know that there are methods other than debt consolidation loans or bankruptcy. Debt management and debt settlement are two.