Debt Consolidation Loans – Plusses & Minuses
Particularly if much of your debt is tied up in high interest credit cards, debt consolidation loans could be an attractive option to start moving you in a more secure direction. These loans customarily fall into two categories – home equity and unsecured. In either scenario, by folding all of your existing debt into a new loan, there’s an almost certain likelihood that you’ll have an overall lower interest rate. The end result will be a lower monthly cost of debt and more cashflow.
In nearly every circumstance, a home equity loan will offer a lower interest rate, but the trade-off is that your residence is now tied to the loan. Any loan failure can put ownership of your home at risk. Another consideration in either scenario, is that lending organizations are looking at loan candidates far more closely than at any time in the recent past. It may be more difficult to secure a loan if you are carrying significant debt, and the overall interest rates are not likely to be what a preferred customer might receive. Regardless of the loan options you consider, the most important step is to tally all of the current interest costs and rates you are currently paying. Then compare it to the interest, fees and length of the loan to determine if you’ll actually be saving money.