Debt Consolidation Loan

Debt Consolidation Loan

Considering a debt consolidation loan? Maybe you don't know yet. On this page, we'll discuss the pros and cons of getting a debt consolidation loan to help you determine if that's the best way for you to get out of debt.

Pros of a Debt Consolidation Loan

When you get a debt consolidation loan, you get a check to pay off all of your outstanding unsecured debts. Just think of it--you're paying bills, but this time, you actually have the money in the bank to pay everything off in full. How great does that feel? Then in about a month, you'll get statements that show balances of $0.

Another bonus? You'll have a light at the end of the tunnel when it comes to paying things off through debt consolidation loans. With credit card debt, if you go on aimlessly paying only the minimum balance on each credit card each month, it will take you 18-30 years to pay it all off. That's because of huge interest rates. But the interest rate on a debt consolidation loan is usually in a single digits. That means you can have the loan paid off in five years and be totally debt free!

Cons of a Debt Consolidation Loan

Many people say that when you get a debt consolidation loan you're just replacing one debt with another. That's true, but again, this debt is at a much, much lower interest rate, guaranteeing that you'll have it paid off in five years. And all the bad press about these loans having a high interest rate? Usually if you have bad credit, the interest rates are higher, but not so high that it's not beneficial.

The other con is that to get a debt consolidation loan, you have to have collateral. Maybe your car is paid for. That's perfect collateral. But most people with a lot of debt don't have collateral. If you do, you can make the argument that selling what you have will get you the money you need, but if that's a car--and your only mode of transportation--you'll have to get another one, which means you'll incur a car payment which you may or may not be able to afford.

If you think about it and decide that a debt consolidation loan isn't for you, why not check out debt consolidation instead?

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