Benefits of a Debt Consolidation Loan
There are many benefits in choosing a Debt Consolidation Loan, some of which are listed below:
- May be able to reduce your monthly payments.
- Can take off some of the pressure you may be under from your existing creditors.
- You will have only one creditor to deal with.
- Lower monthly repayments than unsecured loans
- Ability to borrow more money over a longer period of time.
If you find that you are unable to meet your monthly repayments to your creditors, one option is to apply for a debt consolidation loan.
The principle behind these is fairly simple - you borrow a large lump sum to repay your creditors and are then left with one creditor and one monthly repayment.
This monthly repayment may be lower than the sum you are currently paying, however, you will continue making the repayments for a much longer period.
If your objective is to reduce interest rates and lower your monthly payments, avoid bankruptcy, consolidate your bills and have one monthly payment, or simply get out of debt the fastest way possible, then a debt consolidation loan could provide the answer.
Debt consolidation loans can give you a fresh start, allowing you to consolidate all of your loans into one, giving you one easy to manage payment, and in most cases, at a lower rate of interest.
There are also disadvantages to a debt consolidation loan such as:
- Can pay more over a longer period.
- May incur additional costs for setting up the loan.
- If secured, your property may be at risk.
- You will be left with only one creditor which can make it difficult to negotiate should you have further problems in repaying your loan.
- If the loans you are consolidating have all the interest added at the start you may in effect be paying interest twice being the interest charged for the first loan and the interest charged for the consolidation.