Debt Consolidation- Always a Wise Choice?
A Credit Article Contributed by Colby Shenkle
Debt Consolidation an Illusion?
How could debt consolidation be described as an "illusion"?
Before we reached the age of 10 (and for some of us perhaps much later) the only way to have ANY chance of avoiding eating food we disliked at dinnertime, was through the "skill-full art of illusion". You know what I mean. Even without the use of trap-doors or smoke and mirrors, the enemy asparagus, spinach or liver could be carefully distributed in such a way as to insinuate faux consumption. Carefully calculated piles here and there- the desired effect of vegetable-decrease sought to hide the reality: The food was still there. Just as much as before, and the parents always knew.
The skill-full art continues. And many companies are making a lot of money from it. A popular internet search engine for debt consolidation revealed some 10 million hits. And just as some kids could, at times, fool the parents, many of such debt consolidation companies are fooling consumers, if not simply exaggerating their claims of a solid, reliable financial solution.
We naturally want to live a debt-free life. Therefore, it's only natural that we seek a reliable solution. How, then, can we make a wise choice regarding debt consolidation? How does the basic process work?
Debt Consolidation in Principle
Lets dissolve this into simple terms then, shall we?
When we take a pile of something- be it asparagus, broccoli or spinach, we can move it all over the plate here and there, but in the end we still have the same amount. And we probably still have to eat it. Our indebtedness is much the same. When considering debt consolidation, it's important to keep in mind that we WILL have to pay this money back, including some or all of the interest in most cases.
The big claim, however, of the myriads of debt consolidation companies, is that they not only can help to organize your debts, but also that they will seek to lower your interest rates as well. So it all sounds good, but lets take a look at two things: The process they use, and who they are on an employee level.
First, who are these people? Lets dispose immediately of any notions we may have of a professional, finance-degree-holder on the other end of the line, sitting in a cushy office, sweating over making your life better. More accurately, we can envision someone with limited financial training and limited job history with the company to say the least. Why is this significant? Well, that's why we need to now consider the process they use to "turn your life around" financially.
The truth is, they HAVE adequately recruited the employee you'll be working with. It will not take any reasonable knowledge of finance and credit analyses training to perform adequate consolidation.
First, they will have you gather all of your statements displaying your unsecured debt, the creditor names, account numbers, interest rates, monthly payments, etc. This is a very tedious process, depending on your circumstances, and again, you are doing it on your own. Next, they'll try to "negotiate" with the creditors for a smaller interest rate or monthly payment. Now this seems nice, perhaps even valuable some may say. But only until we consider the facts.
The facts are, all of us as debtors have the ultimate opportunity and responsibility to communicate with debtors regarding our own account. When a debt consolidation company call the creditor on our behalf, they don't use any magic words or psychology to get a lower rate. If the creditor is willing to make such a concession to our account, they will just as readily do so with us on the phone, doing the talking ourselves...for free, and that's a fact.
Debt Consolidation...for Free?
In short, we really help ourselves financially if we just save money we might other wise spend on a debt consolidation service, and do it ourselves. And honestly, making such a wise decision could be the basis of a financial rebound in itself. We must accept that suchlike rebounds will take time, despite the claims of certain greedy companies. Really, consolidation in principle is a great idea.
The best method of achieving it, however, is to take steps ourselves to exhibit good organizational habits. WE can collect the information, call the creditors, and express our honest intent to to resolve the debt. They likely will help you with a feasible payment structure that when abided by strictly, will surely (and maybe not as slowly as we think) "eat up" our unsecured debt.
