Pros and
Cons of Debt Consolidation
As in anything, there is good and bad involved when you get
a debt consolidation loan. Looking at the surface of a debt
consolidation, you can see why many people would find them
appealing. They will take all of your smaller, usually
higher interest rate debts and pool them into one lower
payment per month.
This helps in the long run as you can pay down the debts
without them increasing at a thirty-some percentage of
interest. You won’t be paying just your minimums, thus
adding to the amount owed, instead you will be paying off a
large portion of the principal thus relieving you of your
debts much faster than if you hadn’t consolidated them.
If you get a home equity loan for your debt consolidation,
you will also get tax advantaged that you wouldn’t have
gotten otherwise. However, with the good comes the possible
bad. Once everything is paid off into that one debt, many
people rack the debt back up because they can. They find
that the temptation is too great to spend.
If you get a home equity loan you have just put your home at
risk. If you don’t make your payments, you could lose your
home to the debt consolidation – so it is not something you
want to enter into lightly. You will also find that your
loan might last longer. If you put it on your home you could
end up paying off that debt over thirty years – so you will
want to pay off more than just the minimum payment that they
give you.
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