Free Debt Consolidation Loans Advice

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Debt consolidation loans are touted as the immediate fix for the financial quagmire that is pulling you down. These loans will reduce your immediate interest rates on unsecured debt such as credit cards and signature loans. A single payment that covers all of your unsecured debt is less than the sum of all the individual payments if made separately. At first blush, debt consolidation loans can sound like the messiah of financial sin.

And it should be, but unfortunately it often isn’t. Debt consolidation loans should not be undertaken lightly. Consolidation loans merely treat the symptoms of financial illness; they have no effect on the underlying spending virus. Borrowers need to recognize that poor spending decisions have brought them to this precipice. In order to be truly successful debt consolidation loans must incorporate financial counseling and a commitment to change the family spending habits.

In most cases debt consolidation does not reduce the amount of interest you pay on the debt, it reduces the rate of interest. Debt consolidation loans spread the debt over a wider range of years, typically 10 to 20 years. So, you may not, in fact, pay less interest for debt, but in reality pay more.

Secondly, what was formerly considered unsecured debt is now secured, usually by your home. If you are late or default on your consolidation loan, you risk losing your home. In addition, when real estate markets fall as they currently are doing, then between your mortgage and your debt consolidation loan, you may well have more debt than equity. This can be an extremely distressful situation to be in if you need or want to sell your home.

The road to financial solvency can be paved with a debt consolidation loan. But unless it is reinforced with a radical change in spending habits, it is road that is bound to swallow you in potholes. Cutting up all but one credit card once the debt consolidation loan has cleared the debt, is one sure way, financial counselors say, to start on a new path to financial freedom. By spreading the debt out for a longer period of time, debt consolidation loans can ease the symptoms of too many high interest debt payments going out each month; only the borrower can cure the root of the financial illness.