If your credit card debt is genuinely bad, then you may be considering a debt consolidation loan. A consolidation loan is a loan that you can use to pay off all your debts, by using the loan to pay your debts you effectively 'transfer' your debt to the one company, the consolidation loan lender.
It can make things much easier and cheaper and there will be just the one debt to keep track of each month. Plus, you can usually get a much lower rate of interest on a consolidation loan than what your credit card company can offer.
Consolidation loans have their advantages and their disadvantages and it pays to study what they offer before you commit yourself.
The Rate Of Interest
Be sure to shop around to get the best interest rate you possibly can if you opt for debt consolidation. This interest rate is almost as significant as the one on your mortgage, but very much harder to change after you've signed on the dotted line.
Don't be fooled by any offers that give you a fair rate for a limited time, the chances are you're going to possess this loan for quite a time.
The chances are that any interest rate you're offered on a debt consolidation loan may be significantly lower than the interest rates you're currently paying on your credit cards. If you have a number of cards at a big rate and you've been unable to transferring the balances, then debt consolidation may be the solution.
The Term Of The Loan
A common aspect of debt consolidation loans is that the loans at lower payment rates generally stretch over a significant number of years, it's quiet possible you could be paying your loan off for twenty or more years.
You should aim to find a loan that runs over a shorter term and only requires payments that are as much as you can comfortably afford. Be wary of being offered small monthly payments without considering the considerable number of years you may have to pay that small monthly figure.
Be Wary Of Other Credit Cards
Something else to be aware of when taking on a debt consolidation loan is how tempting it can become to take up an offer of a new credit card. Now you're saving all this cash, you can maybe afford a few extra cards, can't you?
Don't fall in to this trap! Consolidating your debt and then accumulating more is an very bad idea.
Your Home Is At Risk
Of course, this is the biggest risk when you take on any major loan. Almost without exception, the loan will be secured on your house. That means that if you miss any number of payments, the finance lender can take possession 'repossess' your home, dispose of it, and pay back the debt with the proceeds.
There's a whole industry of property developers buying repossessed houses to sell them on for a profit. The chances are that you'll come out of the experience with nowhere near enough money left to buy even the smallest residence and nowhere to live.
If you do take a debt consolidation loan, you need to study the small print as if your life depended on it, it does, and then be very careful.
There is more help and advice on Debt Consolidation Loans, Credit Cards, Mortgages, Investing, Real Estate, etc. at http://www.1stFinanceGuide.com
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