Debt Consolidation Loans - Dangers of Debt Consolidation

In America, the average household carries about $8,000 in consumer debt. This amount includes credit cards, personal loans, lines of credit, etc. Understandably, people are searching for a quick and easy way to eliminate unnecessary debt. Options for reducing debt may include seeking a second job, or obtaining a higher-paying job. Furthermore, millions of people are taking advantage of debt consolidation loans.

Debt consolidation involves creating a new loan, which will lump all creditors together. Thus, instead of paying twenty different creditors each month, you are only responsible for submitting payment to one creditor.

Debt consolidation loans are very effective with eliminating debt. For example, if you paid the minimum payment on a credit card with a high percentage rate, it would take about twenty years to payoff the complete balance. With debt consolidation, most people are debt free within seven years.

There are several benefits of debt consolidation. For starters, your debt is reduced faster. Moreover, the interest rate on a debt consolidation loan is less than the rate offered by most credit card companies, thus you will receive huge savings. Debt consolidating is also extremely convenient especially for individuals with several creditors.

While debt consolidation loans appear to be a nice fix for credit and debt problems, consolidation is not always the best option. Prior to obtaining a debt consolidation loan, you should calculate the savings. For the most part, debt consolidation loans carry a low interest rate. On the other hand, if you have poor credit, you can expect to pay a higher rate. In this instance, consolidation may not be a smart move because the monthly savings are marginal. Nonetheless, debt consolidation loans do afford the opportunity to become debt free within a few years.

Debt consolidation loans are also dangerous because most people secure these loans with property (house, car, etc). While these items are the perfect collateral, if you were to default on the loan, you could lose your possessions. Moreover, while most debt consolidation loans have an initial low rate, the lenders have the right to increase your interest rate. Before signing for a loan, make sure you read and understand the loan agreement.

See Also:

Cheap Loans Dirt Will Seem Costlier!
Loans culture has grown considerably in recent times. Like any growing industry, loans industry has healthy competition. This competition has furthered the cause of finding cheap loans in UK. Cheap loans are not offered on platter. There are tricks to the trade of finding cheap loans.Though ... more...

Bad Credit Florida Mortgage Loans
Mortgage loans are the loans taken while purchasing a house or property. There are various kinds of mortgage loans namely, FHA (Federal Housing Administration) loans, consolidation loans, land loans, conventional loans, balloon loans and refinance mortgage loans.Mortgage loan rates in Florida have ... more...

Cheapest Loans: When Cheap Loans are Not Good Enough
It will be a worthwhile quest, the quest to search for cheapest loans. If you think cheapest loans are out of your reach and constantly evading you then perhaps you are looking at the wrong places. The cost of borrowing, over the last few years, is getting cheaper and cheaper by every day making ... more...

A Look at Common Types of Loans
People sometimes wonder about common types of loans, especially with all of the different types of loans available.There are many common types of loans that may fall into the same categories, as well as some common types of loans that are only different in one or two small ways.Below are the ... more...