subject: A Number Of The Primary Benefits And Risks Of A Debt Consolidation Loan [print this page] Are you really struggling with your debt? Do you have a number of different credit cards, loans, and other types of financing that have built up over a few years that you simply cannot manage? Well, if you are in this position then you certainly are not alone. People all around the world are struggling with debt, but thankfully there are ways out of this bind. One of these would be to get a debt consolidation loan and before choosing this option is important to consider the benefits and risks of doing so.
First of all let's focus upon the main benefits of these debt consolidation loans. First of these is simply the fact that you can put all of your debt together into a much easier to manage package. This means that you simply have one payment to make each month and therefore you don't have to worry about making payments to a number of different creditors.
In addition to this you should be able to achieve more competitive interest rates by taking out a debt consolidation loan as well. Ordinarily people who develop a poor credit lines will have done so due to the responsible spending on things like credit cards and these have notoriously bad interest rates. By choosing to take a debt consolidation loan, however, you should be able to reduce your interest rates significantly.
In addition to this your monthly payment should also be significantly reduced as well. You will only have the one creditor to pay to and therefore you can set up a relatively long payment plan that enables you to only pay off a small amount each month.
So how about the cons? Well, the primary risk of these types of loans is simply the fact that it can be fairly easy to get into further debt as a result of them. Once you have put all of your debts into a single package you are suddenly open yourself up to the possibility of getting additional credit cards or similar debts.
In addition to this it is often the case that debt consolidation loans will take longer to pay off and as such you may end up spending more in the long run. Even though your payments will be lower each month, if you are taking 5 to 10 years to pay off the loan then you may well end up spending serious amounts of interest over that period.
All in all, it is important that you evaluate your personal financial situation before you commit to a debt consolidation loan. For some people they can be perfect, while for others that can be very risky.
