Big debt with low interest is the selling point. Kick your creditors out the door with a one-time debt consolidation loan and live on Easy Street. It sounds good-too good. Debt consolidation loans are easy to sell, but hard to retire.
These loans are frequently long term and require you home for collateral. Work through these steps to make sure that you both need and want to go through a debt consolidation before you sign the application and the contract.
1) Why do want to consolidate your debt?
Most people head down the path to debt consolidation because they want smaller payments to free up cash each month. A few are looking to save money on interest costs. Fewer still consolidate debt to help them get out of debt. In reality, you need to have all three as viable goals in order to justify debt consolidation. If you do not have the last one on your list of reasons, you are probably designing a method to go deeper into debt that you cannot afford in the long run.
2) Evaluate what types of debt consolidation are available in your situation
One of three scenarios usually play out for people thinking of consolidating debt. The first is a home equity line or a second mortgage on their home. Second, a credit card or some other type of credit line is used to absorb all of the other debt.
Finally, an additional form of secured or unsecured debt is exchanged for existing debt. A family member or friend may be willing to make you a loan for this third option. Each of these choices can carry wide variations in interest rates and repayment plans. Weigh your options carefully before deciding to leap into additional debt to retire existing debt….. read more »