Debt Consolidation Loans – What do Avoid

Debt consolidation loans provide welcome relief for consumers who wish to lower their debt and lower their monthly installments.

Debt consolidation allows the borrower to take out one big loan and replace it with smaller loans and other credit cards which reduces the monthly payment and takes away the burden of having to pay many small debts.

There are 3 things to look out for when taking out a debt consolidation loan:

1. Debt Consolidation Loans - High Interest Loans

This is the big one to avoid. The whole debt consolidation idea is to reduce your debts, not increase it, so be careful to calculate what the interest on your current loans are, as well as the total monthly repayment. Make sure that your new loan’s interest and monthly installments are less

2. Debt Consolidation Loans – Make More Debt

Be careful to not fall into the trap of thinking that you now have so much more money left at the end of the month that you spend it, or worse, run up the credit cards again. This would mean that you have a big loan and that you’re adding even more debt again. Rather use half money that you’ll be saving and pay that towards the new loan to pay it off quicker.

3. Debt Consolidation Loans – Debt Counselors or Debt Administrators

Don’t be duped into going into debt counseling or administration by dubious people that misrepresent administration or debt counseling as a debt consolidation loans. It’s difficult to get out of it and will leave a black mark on your name.

The best advice to follow is to always read everything clearly and make sure you know what you are signing for and know what you will be paying.

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