Debt Consolidation Loans: Combining Outstanding Loans into One Simple Payment
Contributed by Matthew Sheldon
Debt Consolidation: Combining Outstanding Loans into One Simple Payment
Seeking debt consolidation can be a wise choice especially if you have a heavy debt load. If you find yourself struggling monthly to pay your bills while wondering aloud if the next phone call will be from a creditor, you know that something must be done. Now, with the recent changes in our nation's bankruptcy laws, it is no longer a simple thing to have one's debts discharged as courts have ruled that you still must pay all outstanding bills. A debt consolidation loan just may be the option you need to help control your financial problems.
Are debt consolidation loans a good thing?
Not all debt consolidation loans are good. You need to shop around to find the best rate and there is a temptation to obtain a debt consolidation loan that will combine your existing debt with a cash payout. For example, if you owe $18,000 on your credit card and have a $5,000 car payment, you may be tempted to take a debt consolidation loan in the amount of $30,000. which would pay off your existing debt while giving you $7,000. in cash.
So, what was originally a $23,000 debt has now ballooned to $30,000. The only way that this particular loan is worth it is if your monthly payment is much lower than the monthly payment of the combined loans you previously had and the number of years to pay back the loan has not increased. In addition, will you use the $7,000 for pleasure or for every day expenses? If you do, you will only dig yourself into a deeper hole.
At this point, you will need independent financial counseling to help you decide if a debt consolidation loan is right for you.
