If you have a huge debt like 4 credit cards, a car loan, a consumer loan and a house payment and you always end up ending up making minimum payments which is causing you distress, then you may think of taking a debt consolidation loan.

It is felt that debt consolidation loans are the best option. A debt consolidation loan is where many other loans or lines of credit are paid off.

There are various advertisements where people are shown to have taken consolidation loan and as a affect of which they are relieved. But are debt consolidation loans really such a good idea?

We analyze below the pros and cons of debt consolidation loans:

(1) One-time payment: Reports indicate that an average citizen of America pays 11 different creditors every month. With debt consolidation loans you pay off by making one single payment. This also helps you to configure how much to pay and when. This also makes managing your finances easier.

(2) Reduction in interest rates: The most common type of debt is the home equity loan, which are also termed as second mortgage; the interest rates will be lower than most consumer debt interest rates. Your mortgage is a secured debt. Credit cards being unsecured loans have higher interest rates.

(3). Lower monthly payments: Because debt consolidation loans have lower interest rate and there is only one time payment made the amount paid per month is reduced significantly.

(4) One creditor: Debt consolidation loan have to deal with only one creditor. In case of problems you have to make one call instead of making several calls. This makes controlling your finance easier.

(5) Tax Breaks: Interest paid on credit cards is irrecoverable and not useful at all whereas interest paid on a mortgage can be written off.

But before you get a debt consolidation loan let’s have a look at the cons.

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