Debt Consolidation Loans – Pros and Cons

You are up to your neck in credit card debt and the water is still rising. You’re barely treading water with the monthly minimums on your credit cards that are already maxed out. Your sleep is restless; you wake in the middle of the night fretting about your financial options and have trouble getting back to sleep. You see a multitude of television commercials for debt consolidation loans.

You’ve got to do something to relieve the stress. But, is a debt consolidation loan the answer?

Pros

• Take out a debt consolidation loan using the equity in your home as collateral. At least the interest on the home equity loan is deductable, unlike the interest on the credit cards.
• By consolidating your many credit cards into one payment, you’ll have lower total monthly payments and only one creditor to contact if you run into issues.
• Typically, your credit card annual percentage rate is 10 percent and in some cases more than 18 percent. Your home equity loan will certainly feature a lower rate.

Cons

• You can lose your home. A consolidation loan is secured by your home. Your credit card debts were unsecured. By not paying those individual credit card debts, the worst thing that might happen is a hit on your credit bureau score and constant calls from the collection agencies.
• After taking out a debt consolidation loan, you will free up some of the monthly payments that you were paying on the multiple credit cards. You might be tempted to continue the poor spending habits that got you into trouble in the first place.
• By going the debt consolidation route, you turned an unsecured debt – the credit cards – into a secured loan. If you run into unexpected financial problems in the future, your home might be in jeopardy. You could lose everything.Resqdebt is providing the above information in our effort to provide consumers with the best information possible.