Debt Consolidation

Written by B Hunter


There are many reasons why people get into debt - some of them self inflicted and some of them way outside of our control. Losing a job, illness or accidents, all of these can suddenly plunge one into unexpected expenditure, and oftenrepparttar only way to deal withrepparttar 112097 emergency is to use debt. There is a tendency, however, to keep on borrowing once you start. This is becauserepparttar 112098 process becomes so easy - credit card companies and banks seem keen to throw cash at you, andrepparttar 112099 interest payments, when regarded individually, often seem insignificant. Before you know it, you are deep in debt, owing money to several institutions and card companies, andrepparttar 112100 bills are mounting. This isrepparttar 112101 stage when one starts to notice infomercials and TV ads for 'debt consolidation'.

Put simply, debt consolidation involves replacing a number of smaller debts at varying rates and conditions with one single 'super' debt at a single (often lower) interest rate and set of conditions. For some people, consolidating debt may be a good thing - for other people it may be bad. It all depends on an individual's circumstances. To explore this, lets look atrepparttar 112102 types of debt.

Some debts are 'good'. Mortgages and student loans are good debts because firstly they have fundedrepparttar 112103 purchase of a valuable asset (a home or education) and secondly because they are usually tax-deductible. Aside from loan-sharking (which you should, of course, NEVER consider!) running up debts on credit cards isrepparttar 112104 worst form of borrowing, asrepparttar 112105 interest rates are frankly usurious, andrepparttar 112106 card companies actively try to encourage you only to makerepparttar 112107 minimum payment, thus keeping you in debt for longer, and maximizingrepparttar 112108 amount of interest they suck from you.

So is debt consolidation a good deal? It depends. If you are really under pressure, and need a breather, sometimes consolidation can berepparttar 112109 only way to get yourself some space in which to sort out your life and finances. The downside is thatrepparttar 112110 consolidation payments, while appearing to be smaller thanrepparttar 112111 sum of your previous debts, usually last for a longer term, meaning that you effectively pay more overrepparttar 112112 life ofrepparttar 112113 loan. And this, of course, is howrepparttar 112114 consolidation companies make their money - they have to profit in some way, otherwise why would they bother?! One VERY important point to note is that your debt consolidation company must allow you to 'overpay' - pay more thanrepparttar 112115 standard monthly payment if you wish. You may have a sudden windfall, or a payrise, and paying downrepparttar 112116 debt makes perfect financial sense. If they WON'T let you overpay, look elsewhere - there are plenty of debt consolidation firms out there who want your business!

Debt Facts

Written by Ian Young


In 2003, almost one and a third percent of US househoulds (about 1,650,000) filed for bankruptcy, indicating that bankruptcy may not have quiterepparttar stigma attached to it as in other parts ofrepparttar 112096 world.

Somehow,repparttar 112097 USA, with a population of about 294 million, managed to have over a billion credit cards in issue. That's over 4 cards for every man women and child. About 20,000 different cards are on offer from suppliers. Those credit cards, together with debit cards, account for a quarter of ALL personal expenditure inrepparttar 112098 US. Debt is a fairly recent phenomenon. Beforerepparttar 112099 1930's, most people couldn't borrow, even to finance property, and either rented homes or built them from scratch. Nowadays, mortgage debt runs inrepparttar 112100 trillions. Personal debt excluding mortgages is about $19k per household on average, over half of which is on credit cards, a figure that is triplerepparttar 112101 statistic of 1990.

Nowadays, over 40% or US families routinely spend more each year than they earn. The difference? Financed by debt.

Convenient to use? That credit card convenience ends up costingrepparttar 112102 average Joe 12% more than paying by cash.

If you only ever payrepparttar 112103 2% minimum monthly payments, each $1000 you owe will take nearly 22 years to repay and will add a further £2,300 torepparttar 112104 bill, meaning you effectively pay $3,300. Despite this being common knowledge, almost 60% of credit card users DON'T pay their credit card bills in full each month. This reliance on high interest credit cards means thatrepparttar 112105 average US family pays about $1,200 in interest on their cards each year, at an average APR of 18.9%.

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