PostHeaderIcon Tell me the cons of debt consolidation loan?


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I know the pros of the debt consolidation loan. I want to know the risks of the debt consolidation loan?

3 Responses to “Tell me the cons of debt consolidation loan?”

  • Judy says:

    Cons

    Easy to get into further debt: With an easier load to bear and more money left over at the end of the month, it might be easy to start using your credit cards again or continuing spending habits that got you into such credit card debt in the first place.

    Longer time to pay off: Most mortgages are the 10 to 30 year variety. This means that rather than spend a couple of years getting out of credit card debt, you will be spending the length of your mortgage getting out of debt.

    Spend more over the long haul: Even though the interest rate is less, if you take the loan out over a 30 year period, you may end up spending more than you would have if you had kept each individual loan.

    You can lose everything: Consolidation loans are secured loans. If you didn’t pay an unsecured credit card loan, it would give you a bad rating but your home would still be secure. If you do not pay a secured loan, they will take away whatever secured the loan. In most cases, this is your home.
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  • R T says:

    Debt Consolidation is a larger loan that will be used to pay off many smaller loans.

    * If a “Debt Settlement” is involved, it will damage your credit. Get a debt consolidation loan from a reputable lender and don’t “settle” with anyone.
    * Most people need debt consolidation because they are in financial trouble. So, most people with debt consolidation loans dig themselves in further because they never corrected the underlying money management problems that got them there in the first place.
    * The debt consolidation loan is usally for a longer term. More time means more spent in interest. Do the math first.

  • CatDad says:

    “Debt consolidation” can refer to two completely different things: The first is getting a loan to pay off all debts to consolidate your bills into one lower payment. If you do this, go through a local bank that you know and trust. Stay away from online firms. You need to have good credit to get this type of loan. Many people who get debt consolidation loans quickly find themselves in twice as much debt as when they started….because it’s simply too tempting to start using all that newly available credit that was paid by the consolidation loan. If you get this type of loan, contact your credit card companies after the debt has been paid off by the loan and request voluntary credit limit reductions to under $500 to avoid the temptation of using all that newly available credit again.

    Debt consolidation also refers to a risky practice of debt settlement: deliberately defaulting on your credit cards to try to force your creditors to settle for less. Stay away from this type.

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