Debt Consolidation vs. Debt Elimination
Before I go into more details about what’s the difference between debt consolidation and debt elimination I would like to get to the core of the problem.
Some facts about debt:
The debt-to-income ratio in the second quarter of 2008 continued to climb, reaching 130.9%. Now this is dumb! But what does this mean? For every 100 dollar earned we have 130 in debt, so we spend 30 more then what we earned. How can we spend what we don’t even have?? It’s the plastic!!! Seems like we all need plastic surgery!
Most normal people are just plain broke because they are in debt up to their eyeballs with no hope of help. If you’re in debt, then you’re a slave because you do not have the freedom to use your money to help change your family future. If we spend what we don’t have today we are spending tomorrow’s prosperity and that’s dumb! Debt stills your freedom. I absolutely believe that no one can say they are free until your become debt free.
Do you want more facts about debt? 56% of divorces are caused as result of financial breakdown. This caught my attention: Every 3 months there are 15.4 billion spent on credit advertising impression on the public. No wonder we are exposed to:” having debt is OK” mentality, but we don’t have to fall prey to it. The average person has a 9,300 dollars credit card debt and holds on about 6 credit cards.
The 3 most evident cause of debt:
-Indulgence. Today people tend to feel that we should get what we want, when we want it, and the concept of saving to buy something seems an alien concept.
-Ignorance. Most people aren’t trained to handle money. Today’s attitude is: If you want it, get it, you deserve it – if you haven’t the money, charge it.
-Poor planning. Without a written plan that measures and monitors income versus expense, you’ll eventually find yourself having financial troubles.
We all make mistakes (but learning from others’ mistakes its better. We don’t live long enough to learn all the mistakes ourselves), so learning from them and knowing how to manage your finances properly, is the best way to ensure that you never become submersed in debt again.
Living a debt free life is not impossible. But it requires determination, time, patience and discipline.
The first step towards a debt free life is to acknowledge that you are in debt. Blame shifting will not get you out of debt, feeling sorry is not enough, excuses are not helping. Leaving bills unpaid and avoiding creditor calls isn’t the solution to your debt problems. In fact it makes the situation worse. However, the fact that you’re reading this article implies you have already accepted that you are in debt and you’re ready to take steps to change your situation.
This is the time usually when the, the fantasy of debt consolidation can suck you right in. The phrase “debt consolidation” had like a magical formula to me. As if somehow, someone would have the power to mush my debt into one neat little package, which by some incredible financial alchemy would also then shrink the debt itself … and I’d only owe a hundred bucks or so. I know I’m not the only idiot who’s had this fantasy, because an entire industry has sprung up to support it.
If you need help with your unsecured debt, then you’ve probably noticed the countless ads saying that your payments can be cut in half or more by working with a debt consolidation company. The truth is I get at least one piece of regular mail offering me low-interest balance-transfer deals for credit-card debt, or arm-twisting e-mail from unknown credit organizations that scream things like:” DEBT RELIEF IS JUST A CLICK AWAY!” “CUT YOUR MINIMUM MONTHLY PAYMENTS BY 50% OR MORE!” “SLASH YOUR INTEREST RATES DOWN TO ZERO!”
These promises are incredibly alluring to anyone who is caught in the quicksand of having too much consumer debt, and who will believe anything, do anything to make the debt go away. But before you start making some bad choices you should understand that what is commonly referred to as ‘debt consolidation’ is actually 3 different products – debt management plans, debt settlement and debt consolidation loans.
The product that will work best for you depends on a number of factors starting with the amount of debt you have as well as your ability to manage it. Each product has its own set of terms, eligibility requirements and repercussions which can affect your credit both positively and negatively. Make sure you understand the differences between the products and choose the right product for your situation.
If cutting your budget hasn’t done enough to ease the burden of debt repayment then you should begin to consider your other options. For those that have already fallen behind on making payments, the longer you wait the more your debt will mount as additional expenses like late fees are added on.
Credit card debt is unsecured and often comes with high interest rates. Because of this credit card debtors can be among those that benefit the most from debt consolidation plans that work to lower interest rates and monthly payments.
It really depends on the amount of credit card debt you owe and the likelihood that you’ll be able to pay it off. Even if you’re able to make the monthly minimum it could take years to pay off the debt while interest rates continue to increase what you owe. That time could possibly be shortened by using debt consolidation which would reduce the overall cost.
Next important question to consider:=> What is Debt Consolidation?
Related posts:
- What is Debt Consolidation?
- Debt Elimination
- How To Get Out of Debt?
- Manage Debt Before It Manages You!
- Holiday Spending – without Holiday Debt.
- Pay Your Credit Card Balance in Full
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