DEBT CONSOLIDATION LOAN CONSEQUENCES - PROS AND CONS OF DEBT CONSOLIDATION LOANS from Feroz Ali's blog

Looking to get a loan to consolidate your debt? If so, understand the following debt consolidation loan consequences before you consider getting one.

Debt consolidation loans are loans in which a new lending company literally buys the smaller loans that you owe, and then charges you one lump payment for those loans. This can happen when you have lots of separate loans out for a variety of reasons. For the most Debt Consolidation Loans  part, you have a lot of credit cards. Or, you might have a combination of credit card bills, car loans, and other loans or bills.

In any case, you find that you can't pay all of these bills and that the stress of paying all of these bills gets too much. This is especially true if you have been charged with high interest rates and your payments each month are simply too much to bear. So you will do something to save yourself, such as take out a consolidation loan. But before you do that, learn the following debt consolidation loan consequences.

Pros

The advantages of getting a loan to consolidate debt is that the calls from the collection agents will stop. This is because the debts that were due won't be due anymore because the debt consolidation company buys them up. As far as the other companies and the credit reporting companies are concerned, those other debts are paid off.

Another advantage is that the interest rates for these loans tend to be smaller. They are spread out over a longer period of time. The person paying off the debt only has to worry about one payment.

Cons

Debt consolidation loans are helpful in some ways, but they come with a cautionary note. First, consolidation loans are secured loans. This means that something of grave value, such as a house has to be secured in order to get these loans. If you are paying the mortgage on your house and get a debt consolidation loan against the value of the house, then your will have two loans against your house. And if you default on this loan, you will lose your house.

The second consideration is that because this type of debt is spread out, you might end up paying out even more money over the long run. The extended payments are part of the reason as to why the interest rates can be offered for so low. You have to ask yourself if you want to be practically enslaved to this debt for a period of 10-30 years.

Now that you know all the debt consolidation loan consequences, as a consumer you need to be very careful that you aren't being taken advantage of. Many of these loan companies bank on the fact that the debt payers won't be able to pay, or that they will be enslaved to this Debt Consolidation Loans for a very long period of time. Before approaching a debt consolidation lender, make sure you know will be able to pay the debt off and you don't lose your home for paying off bills.