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What Are Debt Consolidation Loans And Why Would You Get One?

Jan 27, 2008
If you are one of the thousands of individuals that must contend with a stack of bills several inches thick each payday, then you may want to consider a debt consolidation loan. Debt consolidators offer these loans to people wanting to merge their debts into one affordable monthly payment. Car and house payments, education loans, credit cards, and personal loans can be merged into one debt consolidation loan.

There are several benefits to consolidating your debt. Keeping track of a personal loan can be time consuming and stressful, and even more so if you have several debts that must be paid each month. Merging all or a proportion of your debt into one payment, instead of making multiple payments to different institutions, will ease the stress by making your debt much easier to manage.

Another benefit of receiving a debt consolidation loan would be having one loan with one either fixed or variable interest rate. On variable interest rate loans, your monthly payment would be adjusted occasionally to reflect an increase or decrease in interest rates. If you have numerous variable interest rate loans that fluctuate from time to time, budgeting your cash can be difficult, as the variable amount due changes each month. Although a large proportion of debt consolidation loans are assumed with a variable interest rate, it would be easier to manage one variable interest rate loan than it would be to keep track of many.

Typically, you can get a debt consolidation loan at a lower interest rate than those of most credit cards. It is important to remember that you should only get a debt consolidation loan if the interest rate is lower than those of the loans and credit cards that you are wishing to consolidate. Having a lower interest rate would aid you in paying off your debts sooner. However, this could have the reverse affect if you stretch out a debt consolidation loan for too long, as you would end up paying substantial interest in the long run.

If your financial situation is grim, then obtaining a debt consolidation loan may help you to avoid bankruptcy. Merging your outstanding debt into one more affordable monthly payment would free up extra cash to attend to other financial matters.

A debt consolidation loan would also help to eliminate late fees. It is obviously easier to make one timely payment than it would be to make payments on many loans on or before their due date. Late fees substantially increase the amount that would need to be repaid on a loan and the length of time it would take to repay it. It is therefore advantageous to avoid late fees at all costs. A debt consolidation loan would help to avoid these fees by merging your outstanding personal loans into one easier to manage payment.

If you find your financial affairs strained and are considering bankruptcy, obtaining a debt consolidation loan may help. A debt consolidation loan frees up extra cash by merging your outstanding debt into one lower interest rate loan with a more affordable monthly payment. Making one payment instead of many would help you to avoid late fees that increase the repayment amount on your loans and ultimately the time needed to repay them.
About the Author
Greg Ellis co-founded Cash Doctors, Australia's largest online cash advance lender. The founders understand their clients needs intimately, having needed a source of convenient credit in years gone by. Cash Doctors.
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