debt consolidation Loans

Debt Consolidation Loans

Don't think of debt consolidation as a loan or bankruptcy. It is a program that will help reduce interest rates, eliminate late-payment fees and lower your payments.

Considering debt consolidation for multiple credit card loans may be appealing if you are overwhelmed with credit card debt. Instead of paying 10 different creditors charging different interest rates, a debt consolidation loan allows you to pay off the ten credit cards with one big loan.

These consolidation plans are typically through consumer credit counseling services that arrange for you to pay off your debts within three to five years, although it may vary depending on your needs. Since it takes the average person 10 to 20 years to make credit balances disappear this is often an attractive option however, participating in a consolidation program could affect your ability to get new credit or a loan because some creditors will put a red flag to lenders on your credit report.

Also, it's important to add that debt consolidation may be a lot easier but it's not always a savings.

Before you consider this option be sure that the new consolidated loan is really saving you money. Debt consolidation loans feed on people in trouble with credit card debt so they tend to offer convenience but charge a higher interest rate. In other words you may not get the lowest-available interest rate. Also, if there is nothing to secure the loan they bump up the interest rate.

As with anything you buy it's a good idea to shop around, however before you do so, calculate the interest and fees on your existing accounts to figure out the payments you currently make. Compare those amounts to a consolidated loan to find out if it's actually a better deal.

Begin checking with credit unions instead of banks. They tend to offer better interest rates and customer benefits.

To learn more about debt consolidation, call the National Foundation for Credit Counseling at (800) 388-2227.

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