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That's
because your status has changed, you are now a "bad risk,"
and the company is going to get all it can one way or another.
Since you can't go to jail for failure to pay your bills,
they simply raise your interest rates so it becomes impossible
to ever pay off the debt.
You may
not be in that boat yet, but whether you are or not, if your
bills have gotten out of control, you need to take action.
A consolidation loan is one way to do it. You have several
options to consider.
You may
be able to consolidate through your local bank or credit union.
Credit unions often have more lenient lending rules than banks,
so where a bank might turn you down, a credit union may be
helpful. You can consolidate with either secured or unsecured
loans. A secured loan means you have something of value—such
as equity in your home or some other asset—through which
the lender can get their money if you fail to pay. Unsecured
loans are signature loans; if you fail to pay, the lender
can sue you, raise your interest rates, and put liens on your
property.
Consolidation
is often the intent when people transfer several high interest
credit card balances to one that promises a lower interest.
This can work, providing you then destroy the old cards and
close those accounts. You must NOT keep the old accounts open—for
two reasons. 1) The temptation to use the old card for a special
purchase or some emergency cash is too great. 2) The company
holding the card with which you consolidated will get monthly
reports on your credit. If you simply add their card to what
you already have, you will be considered a higher risk, and
that attractive introductory rate may change very quickly.
Also, be very careful to read the fine print when taking this
route. You may have a "teaser" rate, and if you
cannot pay the balance before the introductory period runs
out, you could be right back where you started.
In
general, using one credit card to consolidate others is not
a good idea. A better option is to work through a christian
debt consolidation company—a reputable one that will
not charge outrageous fees and that will negotiate your debt
for you, thereby bringing down the interest and your monthly
payment. Most debt consolidation companies will not actually
give you a loan. Instead, they negotiate with your creditors
for a reduction in your debt. Then they collect a single monthly
payment from you and they pay the creditors. However, you
can expect to be required to cancel the old credit cards.
If you can't pay cash for a consumer item—you probably
don't need it. And buying on credit now will only give you
even less cash for your purchases in the future. It's a habit
Americans need to break.
*Be
sure to consult with an attorney or specialist with specific
questions concerning the type of debts you have incurred.
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