Debt Consolidation Loans – What You Need to Know
If you’ve eventually maxed out the credit thresholds on your cards and you still have big monthly expenses like car payments, a mortgage and all the bills that most of us have then trust me, you’re not alone. It’s never been lighter to buy just about anything you want no matter what the cost or if you even have the “liquid” funds to buy it.
So, what’s a debt consolidation loan anyway?
A consolidation loan is usually a low interest rate loan that is used to pay off numerous high rate loans. The most significant part of a debt consolidation loan is to secure one with the lowest possible rate as possible. This is key, very key. Getting this low interest rate will save you 1000’s of dollars over the life of the consolidation loan. The time framework to get out of debt through debt consolidation finance varies greatly and depends on the amount of debt and the kind of debt but on average it’s about 4-5 years.
On the surface consolidation loans may seem like a good thing to do if you have a number of high interest rate loans/credit cards, however you have to recall, it’s a secured loan. Secured loans have collateral behind them and it’s almost always your house. If you default on your consolidation loan the bank or lender can (and usually will) sell whatever you put up as collateral.
Here are some pros and cons of a debt consolidation loan:
– Combine all your high interest rate debt into a single low interest rate loan. Again, you need to indeed thrust for that low interest rate.
– 1 single payment. It’s effortless to do.
– Less people to deal with. If you’ve got a question or problem you’ll only need to talk to one institution.
– It’s a secured loan. If you stop making payments the bank will own whatever you put down as collateral when you began the loan.
– It’s not going to fix your spending habits. You need to make that switch.