Personal Finance

    Americans all over are sinking into debt. They are writing checks to all sorts of creditors all throughout the month. It isn’t unheard of for people to have as many as 11 creditors dropping bills into the mail with their names on it. With all of the debt piling up, many are looking for a way out, or a quick fix. Debt consolidation claims to be just that, and with all of the happy people in the advertisements, how could they not be?

    Debt consolidations do have their pros. They could, possibly, help you climb your way out of debt. Just remember every business is a business because they make money. The people offering you these loans are not doing it out of the kindness of their hearts. They are going to make money off of you, and you could end up paying for it dearly.

    Debt consolidation is another loan. However, this loan could make your life easier. Writing one check to one company every month is much easier than writing eleven! Depending on the type of consolidation loan you go with, you might be able to get lower interest rates. Although, if you need debt consolidation, chances are you won’t qualify for those lower rates. You will pay less every month. Because consolidation loans are designed to be paid off over the long term, the rates are decreased every month. You will end up paying more in the long run though, because you will be paying interest on your loan for a longer period of time.

    There are more cons to consider, ones that stand apart from the pros. If you use your home equity to secure a loan consolidation you could end up losing your house. If you get behind on the payments, or something happens like death, illness, or unemployment, they will have the ability to take your house. Consider this: if you are having difficulty paying your bills now, why risk your house on the ability to pay one bill?

    If you think that you will pay the bill on time, and roll any extra money into paying off this new loan, then debt consolidation may be for you. However, with most Americans debt consolidation is a can of worms they don’t need to open.