Debt Consolidation Loans Loans that counter debt trouble

15th December 2006 Author: Gracy Parker

Debts can be a major headache. Supposing you have a number of high-interest debts to pay, a debt consolidation loan is perhaps the best route to take. However, as viable as debt consolidation loans seem in this regard, there are a few things to first look into.
Debt consolidation loans cover the entire amount of all outstanding debts. The money from the loan can be used to repay all debts, with the added benefit that one has to pay just a single amount to the lender, usually at a distinctly lower interest rate. The repayment period of the debt consolidation loan is also usually longer than the traditional loan.
People can take out debt consolidation loans keeping their home as security. It is essentially like taking a second mortgage on a home, deploying the built up equity to pay off the debt. This allows for a lower interest rate and the ability to pay off multiple debts.
It's best to be careful with companies that inflate the home's appraised values in order to give you a larger second mortgage. In these situations, there is generally more to it than meets the eye. If you are looking at selling the house or should something happen to it a fire, for example - then you are in trouble.
Debt consolidation no doubt saves a tremendous amount of money on interest, apart from doing away with the anxiety of having to come up with the installment money every month. For consolidation of large debts, debt consolidation loans are the best option. However, notwithstanding the capacity of this loan type to deal with large debts, debt consolidation loans are equally capable of dragging one deeper into debt.
Debt consolidation loans can be kept as the last resort. There are other alternatives you can try out. Credit cards come with high interest rates. They usually carry the highest rates of interest of most debts. However, the answer could be as simple as picking up the phone and asking for a lower rate. The competition among these companies is so intense that credit card companies may just comply to your request. Also, discreet debt management can render redundant the need for debt consolidation loans. If the debt is concentrated on high-interest credit cards, a bank loan can consolidate the debt. You can consolidate your credit cards into one, low interest loan from your bank.

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