Government debt consolidation loans, government consolidation loan, or debt consolidation program is usually just a large loan that is used by the borrower to repay several other, smaller loans. Often consolidation loans are used to pay off credit cards, auto loans, and similar high interest rate debts. A consolidation loan can be very helpful for the borrower, but there are some negative attributes to consolidation loans.
Government debt consolidation loans could be a good financial strategy for you if you have in the past used your credit cards excessively, have several loans with high interest rates from personal loans to auto loans. You can often take out government debt consolidation loans with a lower interest rate to pay off the balances of your other debts. This strategy leaves you with one payment and a lower interest rate. You should be wary of loan offers that seem to good to be true and use a trusted source for your debt consolidation loan.
However, government debt consolidation loans are not always the best solution. Interest rates that are attractive can be very challenging to find when shopping for government debt consolidation loans. Without a lower interest rate on your new consolidation loan it doesn’t make financial sense to consolidate in this way.
Remember also that you still end up paying off the same amoutn of debt, and even though you have a lower interest rate, the term of the loan is typically extended beyond what the term of your original debts was. This is why the inetrest rate on the consolidation loan is so important – you might find yourself in a situation where you are actually paying more than the original debt amount due to a lengthy repayment term.