Debt Elimination Vs. Debt Consolidation
For years we have been told that they only way to get out of debt or at least to reduce debt is to consolidate debt. I myself was very close to buying into the fact that debt consolidation was the only way out of my current situation. But after doing some research I chose to work towards debt elimination instead of debt consolidation. Here is a brief over of both.
Debt Consolidation:
As all of you know, our current economic crisises has gotten many of us into a position where we are looking for solutions to our current money problems. We hear and read about ways to consolidate debt and how debt consolidation can help you “Reduce Your Monthly Payments by XX%.” This all sounds great but in reality most of us are not disciplined enough to pay off the debt. We take the extra cash and do something else with it and we end up in more debt.
Pros:
- Reduced Monthly Payments: The significant reduction in the montly payment is probably the most alluring benefit. You need to ask yourself, what are you going to do with the extra money?
- Reduced Interest Rates: You may be able to get a lower rate with a home equity loan because it is considered a secure loan. Don’t be fooled by the work “secure.” This does not imply safe for YOU. It means that its safer for your lending insitition.
- One Payment, One Creditor: Ok, so you only have to manage one payment and one creditor, but who if you choose the wrong creditor. What if you got sucked into a scam?
- Tax Deductions: If you go with a home equity loan, you may see some benefits from the tax deductions that come from paying interest on a mortgage. You can’t get that with credit card interest.
Cons:
- Get More In Debt: You may be tempted to continue to use the credit cards you just paid off. This is one of the reasons why debt consolidation is not a cure for credit problems. In fact, it could actually make your debt problems worse.
- May Cost More Overall: Even though your monthly payments and interest are lower, you could end up with a longer-term loan which you end up paying more interest in the long run.
- May Take Longer to Pay off: If you don’t use the extra money to pay off your debt (and even if you do), it could take you longer to get out of debt.
- Could Lose Your Home: If you go the route of a home equity loan, the lower interest rate may not be that beneficial if you default on your loan and you could lose your home.
- One Payment: In some cases, it can be beneficial to pay off smaller loans with higher-interest rates first. You would not have that option if you have consolidated all your debt into a single loan.
- Disreputable Debt Consolidation Companies: Not all non-profit debt consolidation companies or services do not have your best interest at heart. Do your homework on who you want to use if you go the debt consolidation route.
- Forgiven Debt Is Taxable Income: Be very careful if you chose debt consolidation as your route to lowering your debt payments. You may end up owing taxes on the the loans you took out. If you have a debt settlement agreement with your debtors where they wrote off your debt, this automatically creates taxable income for you.
The key to not falling for a debt consolidation scam or getting yourself into more debt trouble is to start learning all you can, do your homework, know your where you stand financially and weight all your options. Before you consider another loan, you should consider what it is going to mean to you in the future.
Debt Elimination:
I have chosen the debt elimination route due to the fact that I would like to be of debt sooner than later. I also do not want to pay more than what my debt is really worth. I have found a debt elimination program that is based on government collection practices that help the consumer.
The Fair Debt Collection Practice Act was set up to give you the consumer, the right and power over the debt collectors. The debt collectors have certain do’s and don’ts that must abide by when collecting debt from a consumer. If the debt collector does not do something he has to do than you can sue him. Equally, if a debt collector does something he cannot do, then you can sue him. Debt collectors typically collect debt illegally because they know that the consumer does not know the law. This is where Legal Credit Cures comes into play. Tim Durkop’s system is so easy but yet so very powerful. It gives you and me the tools to eliminate our debt legally and without all the stress that comes with being financial strapped.
Pros:
- Eliminate Debt in Ten Minutes: This is the easiest step you can apply today. Look around your house and determine what it is that you really need. Most of us have some many “toys” that we never use. Get rid it and start saving.
- Violations of the Fair Debt Collection Practice by Debt Collectors: Thirdy Party Debt Collectors will violate the law if you give them the opportunity.
- Statue of Limitations on Debt: If any of your creditors approachs you to collect a debt which is to old, they cannot legally force you to pay it. If a third party creditor attempts to collect an old debt from you it is almost always money in your pocket.
- Skyrocket Your Credit Score: Based on the Fair Credit Reporting Act, you can benefit from this act regardless of your financial situation. You need to pay attention to your credit report. If there are any errors clean them up.
- Ability to Start Saving For The Future: Don’t let debt weigh you down. If your debt out weighs what you can afford stop giving money away to your creditors. Start putting Tim’s Legal Credit Cures to practice.
Cons:
- Sit and Do Nothing: Legally eliminating your debt will get you nowhere if you sit and do nothing. Yes, life right now is difficult but it can get worse if you don’t start applying some kind of financial rescue for you and your family.
Please follow me while I continue my journey to Debt Elimination Freedom by using the Legal Credit Cures protocal.
