The Christian Debt Consolidation
Disguise
Debt consolidation in any form, including christian debt consolidation can be a predatory game, so you need to be very cautious. About 80% of people who sign up for it end up buried in financial quicksand within a few years, carrying even a higher burden.
This program only treats the symptoms without getting to the real cause of the problem — bad spending habits.
Debt consolidation is a process by which debtors obtain a loan that allows them to consolidate credit card and other installment debt into one lower monthly payment. The payment is often smaller due to a reduced interest rate but most of the reduced payment comes from stretching the payments over a longer period of time.
It's the same principle as a monthly mortgage payment being lowered as a result of a loan being paid off over 30 years instead of 15 years. The longer you pay, the more interest you pay the lender — even if your monthly payment is less.
Let's assume someone has $25,000 in unsecured debt. Their first obligation is a $15,000 loan at 12% interest for a period of 3 years. The second is a $10,000 loan at 11% for 2.5 years. The combined monthly payment for both loans is $880. Now, a
nonprofit debt consolidation company tells you that they will lower the interest rate to 9% and cut your payment in half to around $440.
This sounds good on the surface. However, if you read the fine print, you'll see that they may have structured the loan for six years. The result is you'd end up paying an additional $3,000 out of your pocket for that “lower payment”, at the end of the six-year loan period. Although a company may have a “nonprofit”
status, they're in business to make money.
Personal debt consolidation loans often are promoted as "christian debt consolidation" or "credit card consolidation non profit" and come in two types, secured and unsecured. Unsecured debt consolidation loans are based simply on a promise to pay the loan according to a written agreement. Some form of collateral-a vehicle or a house-usually backs the secured version. It's important to understand that if you can't make the payments or if your payments are late, you could lose your car, your home or both.
In eight out of ten cases, after someone commits to credit card debt consolidation help, the amount of money owed increases. Not only do they have the debt consolidation loan payment, they're now faced with new debt as well.
True christian debt consolidation involves a change in personal spending habits. It takes time, persistence and discipline for complete debt elimination but the rewards and peace of mind can be fantastic. Click here for other articles I've written on debt
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