Debt Consolidation Loans – Pros And Cons

admin — Tue, 01 Sep 2009 19:19:12 +0000

With very low interest rates over the past few years many consumers have been lured into taking on extra debt leaving many in a situation where they can’t keep up with repayments. The consolidation loan promises to be the answer to all your problems but they can create just as many
problems as they solve.

What is Debt Consolidation?

Debt consolidation is the combining of all your current debts into one loan making your debts seem more manageable.

Possible benefits of Debt Consolidation

1.Reduction in stress as consolidation results in only one fixed payment a month to worry about.

2.Transferring high interest debts such as credit cards to a consolidation loan can reduce the overall cost of paying off your loan.

3.A consolidation loan could reduce the amount you have to pay each month by lower interest costs allowing you to resolve debt problems more easily.

4.Payment can be arranged to take place over a longer period further reducing monthly payments.
5.There’s a possibility that a consolidation loan will prevent further damage to your credit rating.

Dangers of the Debt Consolidation Loan

1.The Consolidation Loan is usually secured against your home meaning you could loose the roof over your head if you fail to keep up with payments.

2.Although monthly payments are lower, the actual amount repaid may be higher due to the repayment period being extended.

3.Rarely will a debt consolidation get to the root of the problem ie. unearthing the reasons you are in debt in the first place, meaning things will probably only get worse in the future.

4.The debt consolidation companies that advertise on television charge for the service which will result in you actually getting deeper into debt.
When considering a consolidation loan get in touch with the Citizens Advive Bureau for impartial advice, before you make any concrete decisions.

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Debt Consolidation Loans – Pros And Cons