Debt Reduction Group Program - Complete Credit Card Debt Reduction Program Services

Why Not Consolidation?

Debt consolidation is a popular approach to managing a burdensome debt load. When most people use the term "debt consolidation", they mean one thing. Yet, most of the services that offer debt consolidation define it as something quite different.

Loans - Not Necessarily A Good Idea
A loan for $25,000 at 12% interest with a $400 minimum monthly payment sounds a lot better than 30% interest with a $750 minimum payment - on the surface. This is what many financial institutions bank on.

The problem here is obvious. Not many companies will lend you $25,000 without collateral (like a house or other property). In fact, we've found that many of our clients are in financial trouble and do not have access to the credit necessary to borrow a large lump sum. The reality is that if you are behind on your payments, it appears on your credit file, and makes it nearly impossible to secure a loan.

As well, if in fact a loan is secured, we've found that for many people this extra loan just adds to their current debt load. In a matter of two to three years, the debt increases to where it was, except with this time with much greater consequences.

Equity - Securing Unsecured Debt
Another variation on "debt consolidation" is based on real estate ownership. For example, if your home is worth more than you paid for it, you have equity, and many banks will lend you money against that equity. This process results in little risk to the lender, because if you default, they can force a foreclosure on your property to recover their money.

There is one major problem with borrowing against your equity. In this case, you trade an unsecured debt for a secured debt. The difference is if you default on an unsecured debt, like a credit card balance, the creditor can sue you and obtain a court judgment against you. And yet, they cannot force the sale of your house.

A secured debt, such as a second mortgage, is a far more serious matter, because you've pledged your house as collateral.

The fact is: if you default on a debt that has been secured by your house, you risk losing that home.

It's a risk that is absolutely unnecessary if you instead consider debt negotiation.