Get Smart With Debt Consolidation Loans

By Sean A. Kelly

What are debt consolidation loans? Well, first you should know what debt consolidation is! Debt consolidation takes the total of all your individual debts and combines them into one. For example, if you had six credit card loans with an average interest rate of 18%, a car loan at 12% and you financed your furniture at 11%, you could consolidate all that debt into one loan at a lower interest rate. Then, you would only have one payment to make each month and it would be substantially lower than the sum of all the payments you were making on the loans before. There are problems with that theory though. In order to get that great interest rate, you have to have a great credit score. Most people with a lot of debt don’t have a great credit score. Debt consolidation loans are an attractive option of paying off debts with a single and bigger loan. The main advantage of debt consolidation loan is the comparative lesser interest rate, and smaller and single monthly payment. Ideally, a debt consolidation loan works best for credit card debts that offshoot once a single payment is missed. Their hefty late fees and finance charges increase the balance to an unmanageable amount, which remains so despite the monthly payments. In such cases, even if the debt consolidation loan comes at a slightly higher price, one can consider this to pay off the credit balance and to avoid hefty penalties. However, one should know that most debt consolidation loans are secured loans. Therefore, one must have an asset big enough to get a loan that can pay off the debts.

There are many debt consolidation loans services available and it’s important that you take the time to choose the one that will work best for you. This type of debt consolidation loan service provides you with accountability as well as you get to pay less interest when compared to all other loans that you are having. Moreover most of these debt consolidation companies provide you with debt management counseling that will help you to compare between different possibilities and determine the best option for you. With this type of consolidation service your credit score also increases in the market.

The greatest advantage is that, debt consolidation loans help to consolidate all of your debts under one loan so you will only have to keep track of one payment each month. This is also intended to place high-interest credit card debt under a lower interest rate so you will end up paying less in the long run. Many people use home equity loans for this purpose so they can also deduct the interest from their income taxes, something you cannot do with most other types of debt. A debt consolidation loan creates a new loan secured by your property and pays off most or all of your debts, saving you money and saving your credit. A debt consolidation loan may be a good option to get your debt into a control level while working out of it. You must be smart enough to utilize the benefits of debt consolidation loan in helping you to solve your debt problem and avoiding the potential risks of debt consolidation loan that may cause you into deeper debt issue. With debt consolidation loans you have nothing to lose, except your debts!

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