Bill Consolidation Loan – Pros and Cons of Consolidating Your Debt With a Loan

Written by admin on November 10, 2009 – 10:53 pm

Bill consolidation loans used to be the standard method for debt consolidation, but we have learned a lot since that time and financial experts have decided differently. They are not all bad, but there are several things that you should consider carefully before you go out and apply for a debt consolidation loan.

The benefits

1. Your debts are consolidated and you will only make one payment each month.
2. There is a chance you will have a lower monthly payment, but that usually means a longer repayment period.
3. This debt relief method will not ruin your credit.
4. The interest paid on the loan is tax deductible.
5. Almost any type of debt can be consolidated into these loans.

The disadvantages

1. You must be credit worthy to apply for this type of loan.
2. You will most likely have to secure this loan with your home. So, homeownership is required and defaulting on the loan can lead to foreclosure.
3. This type of loan uses the equity in your home. The equity will not be available until the loan is repaid or the value of the home increases.
4. Because of the current economy, lenders are not anxious to give these loans at the current time.
5. Paying off credit cards leaves the cardholder with available credit. Statistics show that within a year most people that take on loans to pay off their credit card debt will have debt again within a year.

Using a loan to finance debt in most cases is not a smart decision. If anything would happen that would prevent you from making payments, you could be faced with foreclosure and that should be a deal breaker for anyone.

There is a method for consolidating your debts without a loan and that is nonprofit credit counseling. This option does not require you to have a loan or to own a home. This alternative has less risk than a debt consolidation loan and can have you debt free in 3 to 5 years. Get a free quote for consolidating your debt without a loan!

Are you tired of being in debt? To find out how to get out of debt, Click Here!

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