Downsides To Debt Consolidation

By Author: Alisdair Cosgrove
Total Articles: 184
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When you get a debt consolidation loan, the primary use for it is to pay off your credit cards, store charge cards and any other high interest loans you have, for a lower interest rate. Initially there is the benefit of saving money each month on your interest you are paying.

Low interest rates on debt consolidation loans, is what most lenders advertise heavily to make us want to access one of these types of loans. The ads tend to make these types of loans seem to be easy to get and the best way to control your debts, but a debt consolidation loan is not suitable for everyone.

The debt consolidation loan may be a quick fix for a financial bind, and it is a good guess that we will see them advertised on TV and other places, perhaps in junk mail from lenders.
The convenience of a debt consolidation loan might be the most appealing feature, but it does not always lead to saving money. You need to understand what this new loan will be doing to your financial situation in the long run.

If your credit history is less than spectacular, when you consider the present financial market we are living ...
... with, it is not too hard to understand how this happens. It might be that you miss a payment on one of your credit cards because your payment was set up on direct debit, but your employer paid you late and hence there was no money to pay on the card account. Today's tough financial markets are forcing the lenders to penalize even the most minor indiscriminate behavior.

If your credit rating is not good, it is more likely than not that your interest rate on your debt consolidation loan will be higher than previously advertised. It may be necessary to do some basic calculations, so you can make sure your monthly payments are low enough to offer you a significant amount of savings.

People who do not have control over their finances, may find that using debt consolidation to control their debts is bad for them. When people take out a consolidation loan and still use high interest credit cards to continue making purchases, they may simply be adding to their financial problems. The only thing that is happening is that you are defeating the intended purpose of the debt consolidation.

When people already are carrying a large amount of debt on their credit cards, it might be fair to say that they have problems controlling their spending. As their story continues after obtaining debt consolidation, they will most likely not be able to control their spending any better.

If you are someone who has a great deal of debt with high interest rates and are sure you can control your spending, a consolidation loan might still be the one good option you can take to pay off your debts.

The main point is that debt consolidation loans may look as though they have dropped from heaven into your lap, but incorrect use of them can drop you right into deeper debt. Debt consolidation that is wisely used is capable of saving you hundreds and even thousands of dollars over the loan's term.
Alisdair Cosgrove loves to write about finance issues and advise on how people can save money on their personal finance outgoings and can find more of his information at tfgi.com, offering debt help and also great advice on debt loans. Visit Thistle Finance Group today to read more of Alisdair's great articles.