Bill Consolidation: Freedom From Debt?

Stated simply, bill consolidation is getting loan to pay for
other loans so that the borrower is left with only one loan to
finance. Debt consolidation is a step taken by borrowers for
the advantages it may allow like lowered interest rates and
focusing his payment to a single loan.

This often takes placing a property as collateral. When
collateral is guaranteed the interest gets lower because the
risk to the lending company is decreased. When the borrower
fails to meet his obligations, the lending company forecloses
the property as payment for the debt.

People with multiple credit cards often resort to debt
consolidation. Carrying multiple credit cards is almost
surefire formula to carrying high interest rates. Credit cards
are one type of an unsecured loan. As such, credit cards carry
high interest rates and people with multiple credit cards are
often tempted to spend more than they earn.

One good way of solving this is through debt consolidation.
Secured loans from the bank or a lending company (one that is
covered by collateral) have less interest rates than the
unsecured loans for credit cards. Paying then all his credit
cards from a secured loan from the bank enables the borrower of
saving from the lowered interest rate. As mentioned, this is a
good way of doing it, if the habit of spending more than what
one earns is not changed. The process starts again and the
interest rates will soon start to climb, sometimes, worse than
it was resulting to foreclosure of properties.

There are many ways to consolidate debt. There are for example
the student's consolidation loans and the home finance debt
consolidation. But no matter how it is termed, debt
consolidation is little more like transferring one unsecured
loan to another unsecured loan. The debt is still there and
most people thought that by consolidating the loan, something
has already been done. Again, nothing has been done if the
habit that started it all is not resolved.

A better way to real freedom from debt is, when the debt
consolidation has been done and is working, have a plan and
stick to it. One of the generic approaches to that are the
obvious:

Do not spend on that one single credit card the way you were
spending when you have many. This seems to be very obvious and
so people who have consolidated their loans starts out fine.
After a while, the temptation to spend on loans starts. One of
the many reason is that the interests are lowered, the other
one is by habit. So once the debt consolidation is on, have the
plan not to spend on the things that you can live without and
stick to it.

Then, have a plan to pay for the loan that was secured with
collateral. About 80% of the time, people who consolidated
their loans dos not have a plan to assure the payment for the
loan with an extra job and other ways of generating extra
income. When emergencies strikes, the most convenient way is
again to resort to additional lending and the debt grows back
over time, higher interests are charged and the cycle
continues.

The best way to get out of debt and gain back that freedom is
to consolidate and then have a plan that one can stick to. No
amount of loan consolidation will work if the habit that placed
one in debt is not avoided.


About The Author: Robert Thatcher is a freelance publisher
based in Cupertino, California. He publishes articles and
reports in various ezines and provides bill consolidation
resources on http://www.about-bill-consolidation.info