You have most likely seen the daytime TV ads for debt consolidation loans promising an end to all your debt woes. While some of these offers are likely too good to be true, it is important to realize that the main principle of a debt consolidation loan is a solid option for those with a large amount of scattered small debts. The details of such a loan can be complicated for some to get their heads around which might turn off those people who would actually benefit greatly from such a loan.
To give financial newbies or those struggling to keep track of their debt obligations a more informed idea of what these are, this is a general introduction to debt consolidation loans in plain easy to understand language. After reading this, you may realize that investigating these types of loans further may be a solution to your problems.
Let’s delve a little deeper into what debt consolidation loans are and how they can help you to better manage your finances.
What Is Debt Consolidation?
If you owe money to a variety of lenders, debt consolidation simply implies that you take out a single loan from one financial institution and use this to pay off all of these smaller debts. In this way, your debt is consolidated and you now only have one cumulative debt to focus on.
What Are The Advantages?
One of the biggest advantages of debt consolidation loans is that they can sometimes be had for a lower interest rate than some of the rates you may have already been locked into with the smaller loans. In other words, if planned properly you can consolidate your debts to pay a lower total amount in the long run. Another natural benefit of these types of loans is that you now only have to focus on one monthly payment instead of keeping the potential open for forgetting some payments. Forgetting to make payments is horrible for your credit score and your overall financial health. Debt consolidation, while not really erasing any of your debt, can actually make the overall picture of your financial situation more positive.
In many cases, consolidated loan providers also offer a longer repayment window. While this might mean a slightly larger total cost for your debt, it can be helpful to have a much lower monthly payment. As finances can sometimes get tight for just about everyone these days, lowering your monthly payments can provide some much-needed relief and give you the opportunity to enjoy some things that you may have been foregoing for some time.
Are There Any Disadvantages?
Ultimately, there are no explicit disadvantages to debt consolidation loans unless the specific terms of the deal presented to you are less than ideal for some reason. It is important that you understand what you are signing up for as well as shop around with different providers of these type of loans. This will ensure that you get a sense of what’s on offer and what a good deal is compared to an unfair one.
Get Some Relief From Debt
With a debt consolidation loan, your debts will still need to be paid off, there is no magic formula to do this quickly if you find yourself owing creditors a great deal of money. However, debt consolidation loans can be a highly useful tool and are recommended by many financial advisors for those with widely spread debts.
If you do find yourself in a shaky situation, there are alternatives to these types of loans that go a little further. Debt settlement is another option but this is a more drastic step that will significantly hurt your credit score. Keep a close eye on your finances and try not to overextend yourself as a general rule. However, if you are struggling to keep track of extensive debts, look into taking out a debt consolidation loan today. It is a wise decision in the long run.
Dhruval Patel 
Paula