Debt Consolidation In Ventura County
Often, a person with a significant volume of debt from a wide range of creditors can be overwhelmed with financial stress, particularly if they are high interest debts. If you find yourself in that situation and are getting behind in servicing that debt, you might consider a debt consolidation loan that combines many outstanding loans and credit card balances into a single loan. Many Ventura County residents have multiple high interest loans, such as car title loans, payday loans, and similar short-term loans.
What Is Debt Consolidation?
Essentially, a debt consolidation pays off existing identified debts and loans which results in just one loan. The primary purpose of this type of debt solution is arriving at smaller monthly payment that is significantly less than the combined debts that are “rolled” into the consolidation loan. Another major objective is attaining a consolidation loan that has a lower interest rate than the consolidated debts combined. A consolidation lender will will require a degree of collateral to secure the loan which is usually the accrued equity in a home or some other form of equal security to the loan company. A Home Equity Loan or Mortgage Refinance Loan achieves the same objectives.
Advantages & Disadvantages of Debt Consolidation
The target advantages are lower monthly payments, hopefully at a lower interest versus the consolidated debts that can result in more monthly spendable income. The prudent purpose is reducing debt as quickly as possible and eliminating personal and family financial stress. A focus is setting a monthly payment that retires that debt as soon as possible. An off-shoot advantage is possible income tax savings because the interest on home mortgage loans it typically tax deductible versus interest on other forms of debt such as credit cards. Seek advice from you own professional tax adviser.
A disadvantage is the possibility is ultimately paying back a greater amount of principle and interest over a longer amortization period in spite of the fact that your monthly payment on a single consolidation loan may be less than the previous debt payments combined. There are also other associated costs attached to a consolidation loan secured by a home such as closing costs and extra points applied by a mortgage lender. It is also possible that a successful loan could hurt your credit depending upon the credit scoring used by a potential lender. The government offers some outstanding resources regarding things to keep in mind when attempting to consolidate debt.
Explore Other Options First
A prudent borrower will explore other ways to reduce monthly payments and existing interest rates before applying for a consolidation loan. Try negotiating with creditors. Be honest with them and explain your “strapped” condition, particularly if the financial stress has been caused by loss of employment or medical problems. Many creditors will work with you and may reduce interest rates or give you an extended grace period up to several months. Often it is less costly for a creditor to make concessions versus the high costs of collection and debt write-off. Concessions are more likely to be granted if you are facing a bankruptcy option.
Bankruptcy is one of the options that should be considered. If getting a consolidation loan is only stalling the inevitable, then it could be best to just file for bankruptcy. Another alternative is to seek a professional debt counseling service. However, be careful because the industry is saturated with unethical counselors that are merely taking advantage of people in moments of financial weakness.
Also, be wary of “credit repair services. Although there are several reputable credit repair services in Ventura, there are also plenty of unscrupulous services out there whose sole goal is to separate you from your money!
Financial Prudence and Discipline
Debt consolidation that results in reduced interest expense and monthly payments will only compound your problems if you continue to pile up more debt. After you have attained a debt consolidation loan, if you determine you have excess spendable cash, prepay on the existing commitment and maintain discipline to avoid new debt. This would be a great time to create a monthly budget and stick with it. As you develop your financial discipline, you’ll be able to use financial loan services, such as credit card applications, to rebuild your credit.