About Debt Consolidation Loans
By Jack Campbell Published: 11/14/2008
To get a debt consolidation loan, you must typically have a good credit score, the ability to repay the loan and you will usually need to have sufficient equity in your home. You want to think about pursuing this debt relief option only when you can afford to repay the loan and understand the consequences of converting unsecured debt to secured debt.
People often choose debt consolidation loans to secure a lower or fixed interest rate and because they want help organizing their debts. Remember that a debt consolidation loan helps you to reorganize your debts to make it easier to pay them off. It does not relieve you of your debt burdens.
A debt consolidation loan is a viable debt relief only when you can afford to repay your debts in a consolidated monthly payment. If you're having difficulties making payments now, a secured loan may not be the best idea.
Other debt relief options may include some form of debt consolidation, (e.g., debt settlement, debt management plans, consumer credit counseling services) but these options do not typically involve taking out a loan to consolidate your debts.
Here are some more facts about debt consolidation:
• Payback can take as long as 10 to 20 years depending on debt balance and your ability to pay.
• You pay back the full amount of credit card balances, plus interest and any fees.
• These loans require ownership of a home or a pledge of collateral.
• Defaulting on a Home Equity Loan could cause you to lose your home or the collateral you pledged.
• A transaction fee is usually required upon closing or it is built into the interest rates.
• You must qualify for debt consolidation loans, and those who qualify are usually not debt settlement candidates.
Debt consolidation companies get paid big commissions for signing you up for these loans. Their goal is to lend you the maximum amount allowed, so they can make the most money. They do not care if the loan is right for you or not.Debt Consolidation Loans
