All About Credit Debt Consolidation and You

Only someone who has been in a debt trap can tell you how awful it is when your creditors seem to be coming at you from all sides and you seriously consider going underground to avoid their remorseless pursuit. Does that sound melodramatic to you? Check out the mail we received from Alan Hoskins Jr. of New York. “I had five credit cards and spent like there was no tomorrow. At the age of 22, I had run up a debt that ran into six figures. There was no way out of the black hole, and it seemed like suicide was the only sane option.”

While you imagine his plight and shudder, Alan’s is not an isolated incident. According to several surveys, Americans are among the people most likely to run into debt, because the average American spends roughly $1.22 for every dollar earned. You know what they say about your coat being cut according to your cloth, don’t you?

There aren’t too many ways out of this sea of debt, as Alan discovered, but he also came across a financial counselor who asked him to explore the option of a debt consolidation loan. “I don’t know where I would be today without that decision to consolidate my debts,” he says. “That and my improved finance management dragged me back from the brink of bankruptcy.”

So what is a debt consolidation loan? Essentially, it is one consolidated loan that helps you pay back all your existing loans and charges a far lower rate of interest than your current loans. Therefore, instead of paying several different creditors at varying monthly interest rates, you make a one-time payment to a single creditor at a lower rate of interest. Not only is this a logistically simpler procedure, it also significantly reduces your monthly expenditure. In Alan’s case, his monthly expenditure came down by nearly $2,000. Today, six years after he was considering a bankruptcy petition, he can confidently look ahead to a debt-free future.

The other big advantage is that the interest on debt consolidation loan repayments is often tax deductible, which means your tax returns are lower in volume.

As you can see, therefore, a debt consolidation loan is your best way out of a debt trap, coupled, of course, with adequate money management. Remember, no hole is so deep that you can’t get out of it.