Federal Debt ConsolidationDebt consolidation of the federal government
Exactly what is a debt consolidation loans and how does it differ from a normal private loans? What does it really mean if you are applying for/get one from a normal banking establishment against an FCU or another one?
Debt consolidation is one of the things that you use to "buy" a cash package to pay off debt that you have with a number of lenders (people to whom you own money) and who each calculate their interest rates. If the interest rates are added up every months, this can be a very high value, especially for "revolving loans" such as credit cards and overdrafts.
There is a high overall amount of debt and so will the interest payable on these mortgages; this means that you pay out a large amount of cash, mainly to pay the interest. Consolidation credit is intended to make the monetary unit available to pay off all these other liabilities under a credit, usually for a specified term and not for an indefinite term.
As a rule, a permanent maturity is a lower interest rate, up to 6 points below the interest rate you pay on your credit cards and overdraft. Thus, not only is the interest rate less in the long run payed, the rate stays the same over the loan, and you pay back principal and interest; while a revolving credit always gets the interest initially payed then a little of the principal.
Selling as consolidation mortgages, these attracted incredible interest levels, ranging from 1700% to 2250% per year APR (True Interest Ratio per annum). This makes these loan interest accumulate at such a tremendous pace, there's no way you can afford to repay the interest, let alone the principal, and it turns out out of hand so that you can't even repay the interest every single months and the backlogs rise.
Most of these mortgages are located in countries other than your own and do not fall under a protection statute that you may have. Our consumer credit legislation in the UK is desperately outdated and does not provide this type of "offshore credit". However, the main issue is the way in which these credits, if they go into delay (which they are most likely to do), the recovery techniques of the debts are far from being professionally correct, to put it mildly.
In fact, we are approaching the areas of demand for cash by threat. So, keep on going on the way out of these types of credit. These are not consolidation credits in the strict meaning of the term. When you need to consolidated a number of mortgages, go to a suitable local financial institution or a trusted borrower. As soon as you take out a decent consolidation loan, immediately disburse all other credit cards etc. and then call for the cards to be issued to shut down the accounts.
Be careful of so-called payment protection schemes, as many are not only costly in the form of a "premium" per months, which actually raises the annual percentage rate of charge of the loans, but more to the point usually have so many "escape clauses" that they do not hedge the large number of incidents that are likely to lead to a failure.
It is my suggestion to keep away from them just as you keep away from PayDay loans.