Debt Consolidation Loan

There are a lot of different opinions out there about debt consolidation loans to help you eradicate your debt. We want to help you separate myth from fact.

The Truth About a Debt Consolidation Loan

Lately people have been saying that debt consolidation loans are high-interest loans that don't work to your advantage. But if that were true, why would so many companies offer them? It would be ridiculous because nobody would want one. It would be pointless! The whole point of getting a debt consolidation loan is that the interest rates are so low that you can get rid of your unsecured debt in about five years. You can only do that if the interest rate you're paying is lower than the interest rates you are paying on your unsecured debt.

Some people might assert that getting a debt consolidation loan is just trading one set of debts for another. In a way, that's true. You're still going to owe the same amount of money, but because the interest rate on a debt consolidation loanis so low, more of your monthly payment goes towards what you actually owe, not towards interest. If you keep going the way you are, the bulk of your monthly payment goes toward interest, not what you actually owe. And that's why it takes so long to get out of debt.

One truth about a debt consolidation loan is that you have to have collateral to get one. Some companies will allow you to use your house as collateral for debt consolidation loans, but that's not always a wise move. Since most people are only in debt to the tune of $8,000-$10,000, it would be better to use a car, a boat or an RV....anything that you own (not that you're making payments on) that's worth about the same amount of your debt consolidation loan. That way, if you default on your payments, you don't lose your house. You'd lose your car, your boat, your RV...whatever you put up for collateral. (Incidentally, if a lender suggests that you put your house up as collateral, that should be a red flag to you. If your house is your only collateral, you should get a debt consolidation mortgage instead.)

Let's say you don't have a house or collateral. Don't sweat it. Have no fear. Help is still available in the form of a basic debt consolidation program. You can still get out of debt in about five years, but there's no loan involved.

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