Debt Consolidation Loan
It is true that many that use a debt consolidation loan to alleviate debt end up further in debt at the end of the process. It takes discipline, understanding and time to properly deal with years of accumulated debt and what is likely a variety fo different lenders. Government consolidation loans can help manage your debt if used properly.
For perspective, realize that you are essentially taking on debt – the debt consolidation loan – to repay the debt you have. It is like trying to stop a flood by adding water to the rivers in many instances. If you significantly in debt you may have damaged your credit history to such an extent that you will not be able to secure the low interest rates that make a debt consolidation loan work. It remains however, that government debt consolidation loans are the primary tool for many dealing with a debt crisis.
A debt consolidation loan is essentially a large loan that you take on at a lower interest rate than any of your other options – like home equity loans, low interest credit cards, etc. to pay off a given number of higher interest debts that have accumulated to levels beyond your control. A single payment is made to a single creditor and all of the other loans and debts you had accumulated are no longer part of the equation.
This strategy makes it easier for many to manage their monthly finances. The risk often comes in paying for that convenience. Government consolidation loans or other type of debt consolidation loan may appear to be less in total than yoru accumulated debt, but give careful consideration to the length of the loan term and the interest rate associated with the loan. These two variables on your consolidation loan may mean that you brely break even.
Calculate interest and fees on all your existing accounts to determine the total of the payments you now make. Then compare those amounts with the debt consolidation loan numbers to determine if indeed the particular loan makes sense.
Be sure to shop around beyond government debt consolidation loans. Your local bank or credit union may offer a great consolidation loan program.