According to the U.S. Congress' Joint Economic Committee, "As household wealth has declined in the downturn, more American families are facing financial distress due to high debt burdens. In 2007, before the recession began, 14.7% of U.S. families had debts exceeding 40% of their income." This has meant that those struggling with financial difficulties are considering entering a debt management plan or taking out a debt consolidation loan to lower monthly repayments.
Debt Consolidation Helps with Financial Difficulties
Debt consolidation involves putting all borrowing sources, such as overdrafts, credit cards and smaller loans, under one roof and making a single payment. It is possible to extend the term of a loan in order to lower monthly repayments and simplify family finances. Financial difficulties are alleviated as more money is left over each month for essential household bills and house payments.
Is There a Downside to Debt Consolidation?
Only those with good credit will be able to get a debt consolidation loan. Homeowners should think carefully before turning unsecured debt, such as credit card debt, overdrafts and smaller loans, into personal debt that is secured on a house. This collateral gives creditors the right to foreclose in order to retrieve their money in the event of the borrower defaulting.
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