How To Avoid The Risk & Benefit From Debt Consolidation Loan

Debt issue is a matter for many people. Survey results show that American households are carrying an average of $10,000 debt, mainly on credit cards debt. Paying back multiple debts have long stayed a headache for many debtors, and a debt consolidation loan has been a primary solution of this phenomena. While you can benefit from consolidating your multiple debts with a debt consolidation loan, there are some risks that you need to beware of and avoid yourself from these risks. This article will discusses some of the risks of debt consolidation loan, how to avoid it and how you can benefit from utilizing a debt consolidation loan to restructure your life financially.

The Risk of Debt Consolidation Loan

A debt consolidation loan is just another loan that acts simply as replacement of you multiple debts. It allows you to combine all your debts into single debt and pay off with a new loan.

Many debt consolidation loans lower your monthly payments by extending the loan repayment period but the new loan’s interest rate remains the same with your old interest rate. Hence, if you calculate it carefully, you will end up with paying more in total interest. You can avoid this by carefully select your consolidation loan package that has reasonable low interest rate and a repayment term that enough to lower the monthly payment to your affordability. Don’t take the maximum repayment term as you will end up with paying a lot more total interest.

A debt consolidation loan may causes you trap into more debts, why? A debt consolidation loan clears all your credit card debt and your credit cards are free and back to the maximum limit for uses again. Many debtors have forgot that their debt still remain, just change from credit card debt to a consolidation loan. They are very happy that their credit cards can be used again, the impulse purchases, temptation of spending without remembering that they still have a consolidation loan to be payoff, adding more balances into their credit cards and becomes their new debt when they can’t pay it later.

Hence, you must commit to yourself to get out of debt and have a self discipline to control your expenses while repay your consolidation loan. The best way to avoid new credit card debt is terminating all your credit cards; if you enjoy the convenient of cashless payment, a debit card can serves the same purpose.

Benefits of Debt Consolidation Loan

A debt consolidation loan can help you to have a debt relief from your overwhelming debt issue. If your monthly debt payment has exceeded your financial affordability, a lower interest rate debt consolidation loan with a lightly longer repayment term can help you to lower your month repayment and bring your overdue debt to current status, saving your from additional finance charges.

If you want to get rid of debt, you need to be able to manage it properly; a debt consolidation loan allows you to combine all your debts into one for better debt management while you are working your way out of debt.

There are many cheap debt consolidation loans available due to the market competitive between lenders, you may find a good deal among them; Ask as many lenders as possible to send you their debt consolidation loan’s details and carefully review each and every one of them before you finalize your choice.


A debt consolidation loan is a good option to get your debt into a control level while working out of it. You must be smart enough to utilize the benefits of debt consolidation loan in helping your to solve your debt problem and avoiding the potential risks of debt consolidation loan that may cause you into deeper debt issue.

The Tricks of Debt Consolidation

With debt becoming an ever greater problem for American families, there are still many households either avoiding the situation entirely or falsely believing that things will turn themselves around. Purposefully ignoring bill collectors or pretending that something will just suddenly come up to remove the consumer debt that has been accumulating on their ledgers for an extended amount of time could only be deemed foolish, but we do understand the temptations that lead people to tackle the credit card burdens that have amassed through what, after all, has been their own efforts (or lack of such). Nobody wants to surrender control of their budget and short term financial destiny to outside assistance from strangers, but, at the same point, you have to take a serious look at your obligations not only as they stand now but over the long haul. This is where debt consolidation may be a genuine solution for you and your household. At the least, you owe it to yourself to give debt consolidation a studied appraisal to decide if the programs could have some benefit.

Think of it this way. How do you want your life to look over the next two, five, ten, even twenty years? Do you still want to be paying off today’s debts decades from now? Of course not. This is absolutely the worst possible scenario – more destructive in the long run even than Chapter 7 bankruptcy protection. The longer you postpone a debt, the more you are giving up in money lost to compound interest rather than paying off the principal of your debt. When you take out short term consolidation loans, on the other hand, most of the money you spend upon the program is going toward the actual debt instead of the creditors’ pockets. While the debt consolidation approach may require a temporarily harsh sacrifice, shorter term loans will help to get you out of debt trouble with much less expense over the course of loan when compared to simply maintaining the minimum payments. There’s just no way for ordinary consumers to manage truly large debt burdens spread among a number of different credit cards or accounts without some form of debt consolidation.

Again, as we’ve said, it is more than reasonable for borrowers to insist that they can take care of their own debt by themselves without resorting to consolidation techniques. Indeed, one of the reasons credit card companies have been so successful in creating the modern society of revolving debt has been the sheer powers of abstraction needed to fully understand precisely how difficult it would ever be to better your position without greatly changing the framework of your financial obligations. Nevertheless, the magnitude of debt management within a better existence should not be diminished. Instead of putting food on your creditors’ tables, you’ll lead yourself into a position where you can improve your own chances for success and use all that you earn to help your own family struggle through our uncertain economy with some degree of security. By taking out the right sort of debt consolidation loan, you are giving yourself the opportunity to renegotiate the terms of your loan payment in a way that shall prove far more beneficial for all future endeavors. When working with the right companies and agreeing to loans that have the right terms, debt consolidation will allow you to think not just about next month, but also to realistically plan out the rest of your life.

Of course, things are a bit more complicated than simply undertaking an examination of the debt consolidation alternatives. It’s highly important when looking at all of the varied consolidation loan options to find out what approaches are likely to be the most beneficial for you and your family, and this can be a trek that takes months to be fully realized. For one thing, there are just so many variables to be studied at before even the most basic fundamentals are addressed. Personal loan consolidation programs are heavily dependent on credit history, for example, and your ultimate interest rates will to a large degree be dependent upon the FICO scores offered by the three main credit bureaus. Employment history is also a good determination of what sort of debt consolidation program would allow admittance. For debt settlement negotiation, to take just one example, the specific lenders and nature of your unsecured debt – above and beyond the credit and income qualifications – could well make or break debt settlement as a workable notion for your household. Within the boundaries of an article such as this, it’s just too difficult (and, for your authors, ultimately irresponsible) to attempt to accurately predict which form of debt consolidation could be the right fit for your own family. In the following piece, we merely wish to show a few different tips and strategies about the larger consolidation approach so that those interested borrowers may have some sort of map through their own hard fought discoveries about the realities of debt consolidation.

It is certainly true that the process of searching out debt consolidation loans and learning about the various benefits and drawbacks of the consolidation process could seem daunting to consumers who have never before bothered (or, in many cases, needed) to take the time to learn much about debt management and the various forms it may take. If you are worried about your credit history and just want to make all of the bill collector calls go away, it can seem all too tempting for borrowers to simply take the first loan that’s offered in order to solve short-term problems. Still, this has to be said to be one of the most common mistakes you could make. More importantly, it’s a mistake that could have destructive effects far into any unwary borrower’s future. The best thing to do in any of these situations is just to stop, take a deep breath, and understand that you don’t have to agree to any loan consolidation program right away. You will almost certainly be able to get a better offer from other debt consolidation specialists if you take your time and investigate every last alternative. For this reason, you want to always make sure to wait until the last possible moment to commit to a debt consolidation program.

To paraphrase a truism from carpenters and tradesmen, analyze twice and sign once. As every borrower should know, the lenders’ quoted prices may be quite different from what actually turns up on the eventual papers, and, if you should remain dubious (and, trust your authors, you should remain dubious) that the consolidation quotes will barely resemble what you will see once you actually apply for the loans, the only logical thing to do is to compare prices among multiple lenders. The debt consolidation professionals that you work with will argue this decision, to be sure, and they will ask, with no small amount of practiced guilt projection, that you leave everything within their hands. An experienced debt consolidation specialist will make you leave their office feeling like a discussion with one of their competitors would be somehow cheating, but this is not infidelity. A serious attempt at debt consolidation, not to exaggerate things, could make or break your household finances for up to a decade afterwards and, with egregious malfeasance on the part of the consolidation firm, perhaps even longer. The only person who really understands your own best interests is you, after all. This may sound obvious, but many borrowers considering debt consolidation somehow forget the practicalities behind the procedure, and, in order to make an enlightened choice, you need to really understand what options are on the table. By comparing offers from a number of different lenders, you can only then allow yourself an accurate picture of what options have been made available. Furthermore, only then can you make a truly informed decision about debt consolidation that will best help you and your family prepare for the future come what may.

Remember, the real perspective to look at as regards debt consolidation should always involve the long game. You should not be seeking to get ahead for just the next month. That’s what credit card companies count upon. When considering consolidation programs, you should be looking to decide on the best option that will let you get ahead in life through eliminating the debts that hamstring household finance without artificially crippling any larger dreams or unfairly limiting your family’s comfort. For the sake of argument (one offered hourly by telemarketers, we should add), let’s say that someone offers you the chance to reduce your monthly payments by half. This would mean that, instead of paying five hundred dollars a month you would only be paying two hundred and fifty dollars, but, in order to do this, the debt consolidation company may be extending the terms of your loan from five to fifteen years. Let’s even assume there shall be a significant cut in interest rates for the time being. When you calculate the actual terms of the loan, you will end up paying a good deal more money – perhaps twice as much, depending upon rate and amount – than you would have had you left things alone.

This is why it can be so difficult for those borrowers who’d never pretended to be financiers to understand just what the greater consequences of such consolidation loans may be. In the last case mentioned, you would spend far more in interest through the course of the consolidation, and, even without the costs of said consolidation added alongside, what you’d imagined to be a positive action will leave you even farther behind in debt than what you could have achieved by merely paying every dollar toward eliminating those burdens. With a good consolidation loan boasting proper terms, you should not only be reducing those monthly payments, you would be decreasing the total amount of debt that needs to be repaid through the entirely of the loan. You work hard for the money you earn, we assume, and you do not want to throw it away simply because you feel an inexplicable loyalty to one smooth talking consolidation salesman. Read the details carefully for every document, pay attention to the fine print, comparison shop with competitors in the industry, and always make sure that you know what you’re signing on for before they hand you the pen. In the end, the future is always up to you, and there is no reason to blame anyone else for your laziness or sloppy analysis if your debt consolidation should be handled poorly.

We cannot say this too many times: always know precisely what you are signing. It’s hard to even estimate how many correspondents have written us complaining that they attached their names to contracts without taking the proper amount of time to understand the documents completely. In times such as these, particularly when debt collection agencies are breathing down your neck and even the minimum payments of credit cards seem depressingly our of reach, it may seem easy to just sign your name to anything that seems at first glance like it might solve all of your problems. No matter how convincing the debt consolidation professional may be within his beautiful office and how articulate he may be during his glowing presentation, you cannot just take his words at first glance. Look twice, look a third time, look as long and as hard as you need to until you understand every single word of the debt consolidation contract. Don’t be afraid to ask for clarification from other consolidation specialists at the company you have been working with or even to bring the terms to a professional analyst at a neutral firm.