Personal Debt Consolidation Loans

Every month millions of Americans set out paying bills.  As the number of bills you have to pay increases, this task can become close to impossible for some individuals.  When payments are not made, debt is incurred.  If this debt gets to the point where the only alternative for the debtor is bankruptcy, a personal debt consolidation loan may be a good course of action.

Pros of a Personal Debt Consolidation Loan

Debt consolidation loans are loans that combine all of your current outstanding debts.  A debt counselor will likely take charge of your accounts and contact each company you are indebted to in order to consolidate your debt into one loan.  There are many benefits of debt consolidation loans.  Some of these advantages are:

• Manageability. Having different bills to pay each month can be daunting.  Some bills might go unpaid simply because they were lost among the masses of paper.  A debt consolidation loan allows you the ease of having one simple monthly payment to take care of all of your debt.
• Money Saving.  A debt consolidation loan allows you to have just one monthly interest rate.  So, instead of paying interest on every single bill, you can save that money and use it towards paying off your debt consolidation loan.  Also, most debt consolidation loans have lower interest rates than credit cards and other forms of debt.
• Late fees.  Debt consolidation loans can effectively get rid of most additional fees charged by companies.  Since the once monthly payment should be low enough for you to afford, you will not have to worry about individual late fees per bill.
• No More Collectors.  When you start paying off your debt consolidation loan bill collectors will cease to bother you.  No more harassing calls.  No more letters.
• Loan payment flexibility.  When you apply for a debt consolidation loan, you can often choose to make payments that you can afford over a longer time period.  Allowing debt repayment to be truly feasible.

Cons of a Personal Debt Consolidation Loan

Although debt consolidation loans can be great for certain individuals, they are not for everyone.  These loans should only be used as a last case resort.  It should be viewed as a bankruptcy alternative and not a “get out of jail free” card.  Taking out a debt consolidation loan will adversely affect your credit.  It will most likely show up as a note on your credit report.  This might make taking out additional loans very difficult. 

Debt consolidation loans are also often hard to get.  They are a bit of a catch-22 as individuals with very bad credit are often turned down, but it is also these individuals that are most likely to apply for the loan.  For these people, debt management or debt settlement might be better choices. 

Both of these alternatives will damage your credit more dramatically than a debt consolidation loan, but all three choices are significantly better than bankruptcy.