During an economic recession, the result of national and international disruptions in the flow of goods and services due to a decline in the value of money, the cost of living outstrips the rate of earning.
These macroeconomic and micro-economic forces conspire to cause psychological suffering due to increasing virulent conditions breeding indebtedness.
In addition, the credit score system also spikes, recording more negative items and damning more people to poor credit scores.
A serious plan of how to find your way out of debt has to take into account the type of financial instrument used to handle the situation.
One such plan that has proven favorable in both clearing outstanding debt, unsettled bills that have been accruing for some time and lowering credit scores, and in restoring credit has been that of the credit card debt consolidation loan program.
Debt Consolidation Plans A debt consolidation plan is to use a loan issued by a debt relief lender for the specific purpose of consolidating all charge card payments under one umbrella.
A loan of this type is offered at a low interest.
It pays off, in full, all high interest loans due on charge account credits.
The borrower is now left with only one loan to pay off, the consolidated loan.
In effect, multiple loans are replaced by a single loan.
In addition, this single loan is bereft of the burden of high interest and late penalty payments that have been making the charge loans almost impossible to pay off.
Provided this loan is paid off incrementally, in a regular and in a timely manner, the consumer can hope to be completely freed of all credit arrays and begin a new financial future.
What Affect Does This Plan Have On Your Credit History? Consolidating your charge card debts by getting a low-interest loan to pay off all your cards can only have a positive effect on credit history.
For one thing, the amount owed to the open-end credit company is paid off in full according to the agreement.
In other words, unlike a debt settlement, the payment is not a discounted version of the full payment.
For another thing, once the charge card company is paid off, it has no more complaint against the debtor and has to file the loan as "paid in full.
" In the unlikely event that a charge company neglects to update the records, the owner of the credit record can challenge the negative items and have it legally removed.