The recent events that have taken place in our economy over the past couple of years have wreaked havoc on millions upon millions of Americans all across the country. However there are some states that have seen a more devastating affect from the recession than others. California happens to be one of these states; one of the main reasons for California’s troubles is the high amount of foreclosures that have taken place. All of these problems have put tremendous pressure on the residents living in California, one major problem a lot of people have been dealing with is having to much high interest unsecured credit card debt. While there are a number of routes that can be taken in terms of debt relief, among the more popular options is California debt consolidation loans. I will inform you to why this for many people is a terrible idea!

A lot of people are very familiar with the term debt consolidation, however most people do not know what it is. A true debt consolidation usually comes in the form of a loan; this loan is then used to pay off credit card bills. The benefits to the debtor will be only having one monthly payment to the loan, as opposed to numerous monthly payments to multiple creditors which can become very hard to manage; and usually the loan will come with a lower interest rate than what people were paying to the credit card companies.

This may seem at first like a very wise way for one to get out of debt, but for many turns out to be a financial nightmare in the future. The reason is because the vast majority of California debt consolidation loans will be secured, meaning there will be some sort of collateral put against the loan that can be repossessed incase the debtor cannot make good on the monthly payments. In the vast majority of cases people end up using their home as collateral.

So before I go any further as to why this is a terrible idea you must realize for those with no collateral getting a debt consolidation loan is pretty much out of the question. But for those with the means, meaning they have equity in their home and decent enough credit to get the loan this can turn into a nightmare.

You see what happens with a debt consolidation loan secured against your house is that you are essentially transforming your low risk unsecured credit card debt into high risk secured debt against your home. Meaning if you are to default on the payments for this loan you very well may lose your house!

The statistics have shown that over 80% of people who get California debt consolidation loans end up within five years right back in credit card debt all over again. Except this time around they now have not one but two loans against their home that must take priority over the new credit card bills. The sad fact is that most people’s income will not have increased anywhere near the amount that will be necessary to meet all of these financial obligations. Most people will either end up having to file bankruptcy or lose their home through foreclosure.

You see the issue comes down to the old cliché “no pain no gain”. Taking the route of a debt consolidation loan seems like a very easy and painless fix to a bad credit card problem. You simply get a loan pay down the balances on your cards and now there’s no more credit card debt! But you never really paid off your debt you just transferred it to being secured against your HOME!! The vast, vast majority of people make the grave mistake of never cutting up their cards and avoiding getting back into debt. Most people see the new zero balances on their credit accounts and cannot resist the urge to run them back up again, placing them right back in the same position all over again.

What many people have been finding to work better than debt consolidation is debt settlement. This process is not the easiest to go through but the benefits are extremely worth while. In the end of the debt settlement process the debtor will find themselves OUT of debt, and they typically will have saved close to half of what they owe; in addition to becoming debt free in just a couple of years. Debt settlement does have its drawbacks, but the drawbacks are no where near as severe as what can take place if a debt consolidation loan goes awry.

If you would like to see which of these options will be better suited for your particular financial situation then click the link below and fill out an application to request speaking with a debt analyst. We welcome the opportunity to speak with you to see if we can help you get back on the right track financially.

California Debt Consolidation