 |
|
The
Pro's and Con's Of Debt Consolidation Loans
You are swimming in debt. You have 4 credit
cards maxed out, a car loan, a consumer loan, and
a house payment. Simply making the minimum payments
is causing your distress and certainly not getting
you out of debt. What should you do?Some people
feel that debt consolidation loans are the best
option. A debt consolidation loans is one loan which
pays off many other loans or lines of credit.
I’m sure you’ve seen the advertisements
of smiling people who have chosen to take a consolidation
loan. They seem to have had the weight of the world
lifted off their shoulders. But are debt consolidation
loans a good deal? Let’s explore the pros
and cons of this type of Christian debt program.
Pros
1. One payment versus many payments: The average
citizen of the USA pays 11 different creditors every
month. Making one single payment is much easier
than figuring out who should get paid how much and
when. This makes managing your finances much easier.
2. Reduced interest rates: Since the most common
type of debt consolidation loan is the home equity
loan, also called a second mortgage, the interest
rates will be lower than most consumer debt interest
rates. Your mortgage is a secured debt. This means
that they have something they can take from you
if you do not make your payment. Credit cards are
unsecured loans. They have nothing except your word
and your history. Since this is the case, unsecured
loans typically have higher interest rates.
3. Lower monthly payments: Since the interest rate
is lower and because you have one payment vs many,
the amount you have to pay per month is typically
decreased significantly.
4. Only one creditor: With a consolidated loan,
you only have one creditor to deal with. If there
are any problems or issues, you will only have to
make one call instead of several. Once again, this
simply makes controlling your finances much easier.
5. Tax Breaks: Interest paid to a credit card is
money down the drain. Interest paid to a mortgage
can be used as a tax write-off.
Sounds great, doesn’t it? Before you run out
and get a loan, let’s look at the other side
of the picture – the cons.
Cons
1. Easy to get into further debt: With an easier
load to bear and more money left over at the end
of the month, it might be easy to start using your
credit cards again or continuing spending habits
that got you into such credit card debt in the first
place.
2. Longer time to pay off: Most mortgages are the
10 to 30 year variety. This means that rather than
spend a couple of years getting out of credit card
debt, you will be spending the length of your mortgage
getting out of debt.
3. Spend more over the long haul: Even though the
interest rate is less, if you take the loan out
over a 30 year period, you may end up spending more
than you would have if you had kept each individual
loan.
4. You can lose everything: Consolidation loans
are secured loans. If you didn’t pay an unsecured
credit card loan, it would give you a bad rating
but your home would still be secure. If you do not
pay a secured loan, they will take away whatever
secured the loan. In most cases, this is your home.
As you can see, consolidated loans are not for everyone.
Before you make a decision, you must realistically
look at the pros and cons to determine if this is
the right decision for you.
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
Wesley Atkins is the owner of http://www.credit-cards-advisor.com-
which aims to get you fitted with the best credit
cards to suit your situation. With numerous credit
card articles and easy online credit card applications
you will never choose the wrong credit card again.
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
Please fill out the Christian debt information request form on the right to request more information about our Christian debt programs. |
|
|
