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SolveYourProblem.com
Article Series: Debt Relief & Debt Consolidation
I Want To Get
Rid Of My Debt...NOW!
The Pro's
and Con's Of Debt Consolidation Loans
You are swimming in debt. You have 4 credit cards maxed out,
a car loan, a consumer loan, and a house payment. Simply making
the minimum payments is causing your distress and certainly
not getting you out of debt. What should you do?
Some people feel that debt consolidation loans are the best
option. A debt consolidation loans is one loan which pays off
many other loans or lines of credit.
I’m sure you’ve seen the advertisements of smiling people
who have chosen to take a consolidation loan. They seem to
have had the weight of the world lifted off their shoulders.
But are debt consolidation loans a good deal? Let’s explore
the pros and cons of this type of debt solution.
Pros
1. One
payment versus many payments: The average citizen of
the USA pays 11 different creditors every month. Making one
single payment is much easier than figuring out who should
get paid how much and when. This makes managing your finances
much easier.
2. Reduced interest rates: Since
the most common type of debt consolidation loan is the home
equity loan, also called a second
mortgage, the interest rates will be lower than most consumer
debt interest rates. Your mortgage is a secured debt. This
means that they have something they can take from you if
you do not make your payment. Credit cards are unsecured
loans.
They have nothing except your word and your history. Since
this is the case, unsecured loans typically have higher interest
rates.
3. Lower monthly payments: Since
the interest rate is lower and because you have one payment
vs many, the
amount you have
to pay per month is typically decreased significantly.
4. Only
one creditor: With
a consolidated loan, you only have one creditor to deal with.
If there
are any problems or issues,
you will only have to make one call instead of several.
Once again, this simply makes controlling your finances
much easier.
5. Tax
Breaks: Interest paid to a credit card is money down the drain. Interest
paid to a mortgage
can be used
as a tax
write-off. Sounds great, doesn’t it? Before you run out and get a loan,
let’s look at the other side of the picture – the cons.
Cons
1. Easy
to get into further debt: With an easier load
to bear and more money left over at the end of the month,
it might
be easy to start using your credit cards again or continuing
spending habits that got you into such credit card debt in
the first place.
2. Longer
time to pay off: Most mortgages are the 10 to
30 year variety. This means that rather than
spend a couple of
years getting out of credit card debt, you will be spending
the length of your mortgage getting out of debt.
3. Spend
more over the long haul: Even though the interest
rate is less, if you take the loan out over a 30 year
period,
you may end up spending more than you would have if you
had kept each individual loan.
4. You
can lose everything: Consolidation loans are secured loans. If you
didn’t
pay an unsecured credit card loan,
it would give you a bad rating but your home would still
be
secure. If you do not pay a secured loan, they will take
away whatever
secured the loan. In most cases, this is your home. As you can see, consolidated loans are not for everyone. Before
you make a decision, you must realistically look at the pros
and cons to determine if this is the right decision for you.
Click here to discover my current SolveYourProblem recommendation and choice pick for the fastest, easiest and best debt relief solution you'll find anywhere. Get it and reward yourself with more cash in your pocket.
# # # # #
Wesley Atkins
is the owner of http://www.credit-cards-advisor.com - which
aims to get you fitted with the best
credit cards to suit your situation. With numerous credit
card articles and
easy online
credit card applications you will never choose
the wrong credit card again.
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