Pay All of Your Creditors With the Help of an Unsecured Consolidation Loan
An unsecured consolidation loan, as many of you may know already, gathers all your debts into a single loan. As a result, you will now have only one loan instead of several debts to think about. It usually has a lower rate, too. The wonderful thing about this is that you are now freed from dealing with different collectors, people, companies, and due dates.
But your previous creditors still have to be paid, of course. Different companies offering unsecured consolidation loan agreements deal with this aspect differently. Some companies will offer to pay your previous creditors themselves. You just have to provide them with the name of your creditors, your name, account numbers, and other pertinent information.
Other companies, on the other hand, would just give you the money to pay off all of your previous loans after the consolidated amount has been determined. In both instances, your previous creditors are paid, and you just have to worry about your loan with the debt consolidation company. Which option should you choose?
Many people in the field of personal finance would recommend the first option. Since the debt consolidation company directly pays your old creditors, you will not have the chance to get a hold of the loan check. Because of this, they say, you will not have the chance to spend that check on something else instead of paying your creditors.
That is certainly a valid argument, but that option even offers some problems. What if your debt consolidation company fails to pay your old debts on time? What if they fail to pay your previous debts at all? You will end up with two huge debts. In addition, your old creditors could also add penalties and late payment fees to your account.
If you take the loan check and pay your previous creditors yourself, it is true that you might be tempted to spend it on other items. However, this is something you have control over. You can choose to go to your old creditors, and be completed with it. The solvency, intent, management and reputation of any company, on the other hand, are totally beyond your control.
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