Using Financial Products to Help with Debt Consolidation


Debt consolidation is on the minds of many consumers these days. In the 1990's and during the first 8 years of this century, it was common for consumers to take on every type of debt for which they were eligible, even if it meant sinking farther and farther in to financial trouble from which it was unlikely that they would ever escape. There are good and bad financial tools that can be used toward this effort. Understanding the difference between what works and what doesn't is necessary to make this effort sustainable.

Debt consolidation simply means taking several debts and combining them into one debt which can be more easily handled and, preferably, which can be financed for less money than can all the different debts the single debt replaces. To this end, another loan is usually required so that the initial debts can be paid off in full and the creditors eliminated from one's life. Even though this can be something of a hassle at times, the relief of eliminating an unethical or simply abusive lender from one's life is well-worth the effort in most cases. The stress that is removed from day-to-day existence can make life much more livable.

One very poor strategy for debt consolidation which has, unfortunately, been put to use in the past by many consumers, is to take several high-interest debts and to roll them all into one debt which offers little in the way of improved interest. This is commonly seen where consumers try to bring credit card debt in line by rolling several cards into one card and, thereby, providing themselves with the illusion that they have made a move toward making their debt more manageable. Nothing could be more illusory in benefits than such a financial move.

Debt consolidation should always reduce the costs of financing, never increase it. Credit card debt is among the most high-cost types of loan to finance. Putting a large balance on one credit card by moving several other credit cards to that account does nothing to reduce the amount being paid every month and even less to improve one's credit score. Oftentimes, the very large debt rolled onto the new card will give the company an excuse to engage in punitive measures such as higher interest rates and outright penalties, totally negating the benefits of moving the debt in the first place.

Debt consolidation should leave the consumer with less potential and actual debt on their credit report. Having three credit cards with zero balances on one's credit report does not improve one's credit rating, especially when that debt has simply been put on one card and still exists on the individual's report. In fact, having zero balance credit cards lowers one's credit score because lenders see that debt as "potential", meaning that the consumer could well-exercise their ability to run up those revolving accounts and, thus, to get themselves in way over their heads.

Non-credit card type loans which offer less than desirable terms are sometimes used as debt consolidation tools in the belief that they will offer some relief, as well, and produce equally unsatisfactory results. The idea with consolidating debt is far more than simplifying payments. Done correctly, it can reduce payments and, done with great skill and attention to detail, it can greatly reduce the amount of time that one is saddled with paying off debts. Consolidating is supposed to reduce stress, not prolong it, and using financial products which are paid off quickly is generally preferable to entering into long-term arrangements.

For debt consolidation where mid-range amounts of capital are concerned, a car title loan is an interesting option. These loans are easy to secure as one offers up collateral, a car title, as a guarantee that they will repay the debt. The loan amount is easily financed and, if one actually manages to pay it off ahead of time, there is no penalty levied against the consumer for doing so as is the case with most other types of lending. These loans are available online but, of course, one must present their car for inspection at a physical location at some point.

Debt consolidation can be achieved by using car title loans even if the consumer's credit is sorely lacking. Many hard-working, responsible individuals have suffered blows to their credit rating due to the recent financial troubles. Car title lenders don't use credit reports in any regard as they use collateral arrangements to secure the debt. This means that even individuals who may be ineligible for other financial products should be able to secure this type of lending and, if they play their cards right, use these products to liberate themselves from other forms of debt which have significant negative impacts on one's life.