[NumPy-Tickets] [NumPy] #2145: Disadvantages Of A Debt Consolidation Loan

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Mon May 28 04:46:54 CDT 2012

#2145: Disadvantages Of A Debt Consolidation Loan
 Reporter:  bomwesoly  |       Owner:  somebody   
     Type:  defect     |      Status:  new        
 Priority:  lowest     |   Milestone:  Unscheduled
Component:  Other      |     Version:  1.6.1      
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 If youve ever watched day time TV then you will know all about the debt
 relief and consolidation companies that claim to be able to magically wave
 away your debt and money problems. Unfortunately the reality is not quite
 as wonderful as these companies will have you believe, debt consolidation
 is one of many options that are available to you and may not be the right
 tool to reduce your monthly debt burden. Here are four disadvantages to
 taking out a debt consolidation loan.

  Turns Unsecured Loan in to a Secured Loan

  Your credit card and store card debt is known as unsecured loans because
 your home is not at risk if you fail to repay the debt. A debt
 consolidation loan http://samedayloans.webstarts.com is a secured loan and
 you may lose your home if you dont meet the repayment terms. Many people
 have found out the hard way thay a debt consolidation loan wasnt the
 answer to their problems and lost their house because they didnt change
 their lifestyle or spending habits.

  Higher Total Repayment

  A debt consolidation loan aims to reduce your monthly expenditure by
 lowering the amount of interest you are paying each month. However, these
 loans are for a much longer period of time so you may end up paying out
 far more in the long run. Unless your back really is against the wall it
 might be more cost effective to pay off the credit card debt rather than
 burden yourself with a long term loan where you pay more interest.

  Treats the Symptom Not the Cause

  Your debt is a symptom of a problem  namely you are spending more than
 you can afford each month and living beyond your means. A debt
 consolidation loan will give you short term relief but not solve the
 problem of over extending yourself each month. There have been many
 stories in the media about people who took the debt consolidation loan,
 saw the zero credit card balance and continued to spend as before and got
 back in to debt.

  Heavily Dependent on Your Credit Score

  If you are not a home owner then you have limited options for a
 consolidated loan since it is usually secured on your home. If you are not
 able to provide a good security then the rates can be comparable with what
 you might be paying on your credit cards so you are not actually saving
 any money. Similarly the advertised rates are usually for people with
 perfect credit scores and who are looking to borrow a large amount, which
 doesnt reflect the type of person who is looking for a debt consolidation
 loan so the rate you actually pay is likely to be much higher.

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