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Debt Consolidation Refinancing – Why a Debt Consolidation Loan Might Be Right for You?

In today’s uncertain economy, many people find themselves with mounting debts. Too many store credit cards, bank credit cards and installment payment plans with small or large payments due have led people to pick and choose which bills to pay. If you are faced with many debts, a debt consolidation loan might be the right choice for you. As with any financial choice there are plusses and minuses to these types of loans and you need to consider your financial situation carefully to see if this option would work for you.

These loans are larger sized loans that are used to pay off smaller debts. This process helps to consolidate your debts, make bill paying more efficient and hopefully lower the interest rate on the debt you are paying back. If you take a close look at your store credit cards and bank credit cards you will see that the interest rates you are paying on the charges are often 20% or more. Each month your minimum payment or whatever money you are allocating to that bill goes in large part to paying the interest on the charges.

This may mean your balance is staying the same, going down only slightly or in some cases going up. Paying your debts in this way may leave you paying back relatively small charges for years or even decades. You need credit card relief and a debt consolidation loan may be the right answer for you. With a this loan your bills will be combined, your interest rate lowered and your smaller debts paid off. This enables you to manage your finances more effectively and efficiently, concentrating on paying down one debt rather than multitudes of debt.

The Pros and Cons

There are some advantages and disadvantages to these types of loans so it is important to carefully consider whether an unsecured loan is right for you.


  1. A fixed monthly payment. You will know what you have to pay every month to pay down your debt. This fixed payment makes financial planning easier and takes some of the guesswork out of the equation.
  2. A lower interest rate. As discussed above, unsecured debts such as credit card debts and medical debts or payday loans often have high interest rates attached to them. If you only pay the minimum each month, you may be paying off your debt for years if not decades. You will save money with a smaller overall interest rate on your unsecured loan.
  3. Improved Efficiency. By having many of your smaller debts combined into one, the paperwork and stress is drastically reduced. Rather than worrying about paying 5 or 10 different bills in a timely manner, you have one bill to worry about. You will find organizing your debt and keeping track of your cash flow a lot easier.


  1. Some Debts May Last Longer. By combining your debts, you may be prolonging the life of some obligations even while you are shortening the length of time required to pay back others.
  2. Your Total Repayment May be Higher. When you combine your debts in a debt consolidation loan you may find that your fixed payment is still too much for you to afford. Therefore you may need to extend the life of the loan to lower the monthly payment. By doing so you may increase your overall interest repayment over the course of the unsecured loan.

A debt consolidation loan is a personal decision and one that should be weighed in light of your total financial picture.

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