Tag: debt coverage ratio

You are swimming in debt. You have 4 credit cards at the top, a car loan, a consumer loan, and a house payment. Simply making payments minimum is the cause of your distress and certainly not out of debt. What should you do?

Some people feel that debt consolidation loans are best option. For the debt consolidation loan is a loan that pays for many other loans or credit lines.

I'm sure you've seen ads smiling people who have chosen to take a consolidation loan. They seem to have had the weight of the world lifted from his shoulders. But they are loans debt consolidation a good deal? Let's explore the pros and cons of this type of debt solution.

Pros

1. One payment versus many payments: The average citizen of U.S. pays 11 different creditors every month. Make a single payment is much easier to figure out who should pay how much and when. This makes the managing your finances much easier.

2. Reduced interest rates: Since the most common type of consolidation loans debts is the home equity loan, also called a second mortgage, interest rates will be lower than most interest rates consumer debt. Your mortgage is a secured debt. This means they have something they can take from you if you do not make your payment. Credit cards are loans without warranty. They have nothing except your word and its history. Since this is the case, unsecured loans typically have higher interest rates.

3. Payments Lower monthly: Since the interest rate is lower and because you have one payment vs many, the amount you pay per month is typically decreased significantly.

4. Only one creditor: With a consolidated loan, you only have one creditor to deal with. If there are any problems or questions, simply make a call instead of several. Again, this simply makes controlling your finances much easier.

5. Tax Breaks: Interest paid to credit card is money down the drain. Interest paid to a mortgage can be used as a tax write-off.

Sounds great, does not it? Before rushing out to get a loan, we will see the other side of the picture – the cons.

Cons

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

2. More time to pay: Most mortgages are the range 10-30 years. This means that instead of spending A couple of years out of credit card debt, you will be spending the length of your mortgage getting out of debt.

3. Spend more over the long term: While the rate of interest is less, if you take the loan over a period of 30 years, you may end up spending more than if you had kept each individual loan individual.

4. You can lose everything: Consolidation loans are secured loans. If you did not pay an unsecured loan credit card, would give a bad rating, but his house would be safe. If you do not pay a secured loan, you get what you said the loan. Most cases, this is their home.

As you can see, consolidated loans are not for everyone. Before taking a decision, you should look realistically the pros and cons to determine if this is the right decision for you.

Wesley Atkins is the owner of http://www.credit-cards-advisor.com– which aims to get you fitted with the best credit cards to suit your situation. With numerous credit card articles [http://www.credit-cards-advisor.com/articles/index.html] and easy online credit card applications you will never choose the wrong credit card again.

Inconvenient Debt – Glenn Beck