Debt Consolidation

Consolidating all your debt into one monthly bill may seem like a great way to take control of your debt, but you must be careful, Debt Consolidation Loans have a catch. When a lender loans money to pay off your debt, you have one monthly bill which is paid to the lender, often these loans do not have a lower APR and can be as high as 24%. In order to receive favorable terms and debt reduction, a property must be put up as collateral, such as a home or automobile. If you don’t have a set plan to manage your finances after receiving reduced payments and lower interest rates, you face a great risk of losing more than you previously have. You face foreclosure of your home and repossession of your auto as well.

Another issue with debt consolidation is that, although the monthly payment and interest rate are reduced, the term is often extended as well, actually increasing the total amount owed.