What Is A Debt Consolidation LoanIs A Debt Consolidation Loan Right For You?A major appeal of debt consolidation loans is convenience. Instead of paying 20 different creditors who are charging different rates at different times of the month, you take out one big loan and pay off all those accounts. Then you make a single payment on that loan once a month.Before you sign on the dotted line, be sure that the costs of the new, bundled loan will truly be less than what you're already paying various creditors. For many consolidation-loan candidates, their current credit woes mean they won't get the lowest-available interest rate. Plus, when there is nothing to secure the loan (such as your home), expect the lender to bump up the rate. Calculate interest and fees on all your existing accounts to determine the total of the payments you now make. Then compare those amounts with the consolidation loan numbers to make sure it truly is a better choice. The FTC advises consumers to stay away from companies that guarantee they'll provide loans if you pay an advance fee. Legitimate creditors may ask for an application fee in advance but won't guarantee approval of a loan. All of these issues do not mean there is never a situation where debt consolidation loans are appropriate. You very well may be able to lower your interest rates and monthly payments. But these debt consolidation loans should not be taken without doing the appropriate homework and crunching the numbers to make sure you can make the payments, even if disaster strikes. |