Debt Consolidation Loans

Debt consolidation loan is used to consolidate your other debts. Let us say you are currently bonded to 3 other debts, namely car loan, house loan and credit card loan, you can take a debt consolidation loan to pay off all the 3 debts. Take note that this loan does not directly reduce your loans. Instead, it consolidates them so that you can have better financial planning. With this, you can re-structure your financial situation so that it enables you to achieve your goals. This article tells you the advantages of taking such loans.

Advantages:

1) Low rates:

Since debt consolidation loan has lower interest, it is beneficial to use it to clear other loans with higher interest. It is as if you are now paying less for you previous loan yet you are still able to pay all your loans off.

2) Fixed interest rate:

Fixed interest rate is crucial for a long term financial planning. When it is fixed, your future financial situation is more predictable. While the interest rate of your other loans might be changing, you can now finance them with the one with fixed interest rate.

3) Convenience:

If you are a workaholic who is having more than 5 loans, repaying and keeping them up can be a hectic task. Therefore, with debt consolidation loan, you are now only need to make one payment at a time. Accidental mixed payments can easily be avoided.

Despite all the advantages it gives, there are people who against debt consolidation loan. This is because it does not reduce your debts. What it gives is solely the convenience of organization. Also for some, you may need to take a relatively longer time to clear the debt.