Debt Consolidation Loans

Paying off debt is a goal shared by millions of Americans. If you’re thinking of joining their ranks, it’s a goal worthy of pursuit. Unfortunately, not everyone can afford to write a check to cover everything, but debt consolidation loans give you the satisfaction of doing precisely that. Although the sum of your debt remains the same, tracking your payoff progress is easier when everything is in one place. But is debt consolidation your best option or would you be better off attacking each debt in turn? Reviewing the basics will help you decide.

Why to consolidate

People consider debt consolidation loans for a number of reasons, but the motivation remains the same. If your rates are too high, your payments unaffordable or you simply can’t keep up with all the minimum monthly debt payments, a consolidation loan can help you by simplifying your financial life. You must decide which part of the equation is most important to you in the event you cannot have all three.

For example, if you can only obtain an unsecured personal loan to consolidate your debt, the rate may not be much better than your original accounts. What you do gain is a single payment to make each month that is potentially lower than the sum of your current payments. On the other hand, you might find a phenomenal rate, but with a shorter term, that makes your monthly payment higher. Although you pay more each month, you save on your total interest payments and get out of debt years sooner than you would otherwise.

Disadvantages of consolidation

Debt consolidation loans aren’t right for everyone. Unless your consolidation is part of a bankruptcy case, there’s nothing stopping you from running your credit card balances back to your pre-consolidation levels. The difference now is that you have a debt consolidation payment to make each month in addition to your new balances.

You must also consider the type of debt consolidation loan you choose. Using the equity in your home to pay your bills is an option in many states; however, it is not one to take lightly. While you may enjoy tax advantages or flexible payment terms, you’ve used your home as collateral. This means the lender has a legal right to the property should you become unable to repay the loan. Second liens rarely foreclose on property over non-payment, but they can make it difficult to sell or refinance your home.

Deciding to consolidate

Ultimately, only you and your family can decide what’s best for your financial stability. Whether you decide to use debt consolidation loans or tackle each debt on your own, the most important thing is to get out from under those debts and focus on the important things in your life.

http://www.superpages.com/supertips/debt-consolidation-loans.html