Debt Diner - Debt Consolidation Loans

Debt Consolidation Loans

Feeling as smothered and covered as Waffle House hash browns by your debt? A popular option for those with good credit and collateral are debt consolidation loans. Read all about debt consolidation loans here.

The Basics of Debt Consolidation Loans

If you have good credit and collateral, you could be a candidate for a debt consolidation loan. Debt consolidation loans are not the same thing as debt consolidation because a loan is made to you by a debt consolidation company. (No loan is involved with debt consolidation.) Since the purpose of debt consolidation loans is to pay off unsecured debts, that's what you do with the money. Then you make monthly payments to the debt consolidation company. Because the interest rate on debt consolidation loans is so much lower than what you're probably paying on your unsecured debts (like credit card debt, student loan debt and sometimes even medical bills) you'll have your debt consolidation loan paid off in about five years.

The Dangers of Debt Consolidation Loans

Debt consolidation loans can be dangerous. They're not for someone who's undisciplined. Here's an example: When you get a debt consolidation loan and pay off your credit cards, they are no longer maxed out, so you might be tempted to start using them again. If you do, and you max them out again, you're likely to get yourself in a situation that's worse than before you got a debt consolidation loan because now you have your loan payment plus your high minimum payments on your credit cards, which defeats the whole purpose of credit card debt consolidation. Unless your income has gone way up as well, this could be a problem. And although your credit might still be good, you could be too "overextended" to get another debt consolidation loan.

Another Type of Debt Consolidation Loan

Debt consolidation loans can be found under many different names--credit card debt consolidation loans and debt consolidation services, for example. But there's another kind of debt consolidation loan that's a little different--a debt consolidation mortgage. A debt consolidation mortgage allows you to borrow from the equity in your house to pay off your unsecured debts. The dangers are the same as with a regular debt consolidation loan, except your house is your collateral, so if you miss payments, you could lose your home.

Ahhh, here at the Debt Diner you'd think all we served was cheap debt consolidation loans - but thats not true. Debt consolidation has a certain attraction these days, a certain kitsch value making it oh so expensive, or at least more than its worth.