Using Debt Consolidation Loans to Repay Credit Card Obligations

Debt consolidation loans offer immediate and effective freedom from accumulating credit card debts and other payables. Consolidation of debts could be a good and viable way out of just about any debt. But they are also not always the most outstanding solution to any indebted person.

There are advantages and disadvantages to using debt consolidation loans in repaying continuously accumulating credit card debt. The most important pros are the following:

Pros

Debt consolidation loans facilitate for single loan payment installment. This is an improvement from paying several installments at different times of the month. Typical Australian households shoulder multiple credit card bills every month. They often overlook and confuse credit card debt dues and penalties, leading to more charges. Needless to say single installment facilitated by debt consolidation loans make for easier handling of finances.

Lowered interest rates are often attained by taking debt consolidation loans. Specifically home equity loans get lower interest rates due to collaterals. Repayment of credit card debt may have rates that are a little higher because credit card debts are usually risky on the part of lenders.

Debt consolidation loans take a single creditor. You do not need to deal with multiple lenders, which could have different rates, terms, and penalties. Thus, you could easily take control of your finances.

Credit card debt could stop growing or accumulating. As you know, if credit card dues are not paid in full, the amount would keep on incurring interests, plus there may be other penalties and charges. You need to repay the amount immediately and debt consolidation loans could help you do it.

Cons

As mentioned, there are also disadvantages to using debt consolidation loans to repay and eliminate credit card debt. If you think such loans are always the best decision to take, consider the following points:

You may eventually raise your actual debt. This may involve your lack of discipline. After repaying your credit card debt, you may be tempted to start purchasing using your credit cards again. If you fall into this pit, you may end up having greater debt in the future.

The period of payment is usually significantly lengthened in debt consolidation loans. Such loans are usually requiring fewer monthly payments for the consolidated debts. The catch is that as the maturity date is prolonged, you are ending up paying more. Some people also dislike the idea of paying debt consolidation loans for about 10 to 25 years.

Debt consolidation loans are considered secured loans because they are backed by assets that serve as collaterals. If ever you discontinue paying dues for unfortunate reasons, you may end up losing your collateral (your home or other valuable properties).

To sum up, debt consolidation loans are among the fastest and most secure means of eliminating credit card debt. However, they are not for everyone. To some, applying for debt consolidation loans may become a greater mistake than accumulating credit card debt. Be prudent and wise in making your decision.