Posted on May 26, 2009 at 7:08 am I have some credit cards I want to pay off now and need to get a loan to do so. If someone could give me some information about these consolidation loans that would be great.

Posted on May 26, 2009 at 7:18 am A person who takes out a debt consolidation loan for credit card debt gets the loan from the consolidator and pays off all of his credit card debts. In return, the debtor now only pays back the consolidator by making one monthly payment. The loan is extended with interest, often times fairly high. People who usually take out consolidation loans to pay off credit card debt have multiple accounts and need one simple monthly payment. Or, the interest on all of their credit card accounts may be extremely high and they want to try and get a loan to pay that off at a lower interest rate so they pay back less when all is said and done. Often though, these debt consolidation loans must be secured with collateral (property). Unfortunately, since credit cards are unsecured, this carries a risk for the borrower since they are now putting their property on the line if they can't pay the loan back.

Posted on May 26, 2009 at 12:57 pm Are you sure that taking out a loan is your best bet? Keep in mind that the interest rate on a loan could be higher than the rates on your credit cards. And you know what that means- you will end up paying more back to the consolidator than you would have if you paid off your creditrs over time. What are your interest rates? What does everyone think? Debt consolidation loans good or bad?

Posted on May 26, 2009 at 5:11 pm The thing about debt consolidation loans that I really don't like is the fact that you potentially are turning an unsecured debt into a secured debt. If you are having financial problems to begin with, why would you want to put your assets at risk? I just don't see the benefit there. My vote is bad- I think debt consolidation loans can lead to more serious problems in the end, and do not attack the root of the problem that puts a lot people in trouble in the first place.

Posted on June 1, 2009 at 12:27 pm I agree- essentially you still owe the same amount, it just means that from a month to month basis you may not have to make as high a payment to repay the debt. Unfortunately, as a result of a lower monthly payment and thus a longer repayment period, you may end up paying back more to the consolidator than you would if you had simply paid off your credit card lenders over time. This certainly depends on what types of interest rates your credit card lender(s) and the debt consolidator are charging.

Posted on June 24, 2009 at 2:48 pm So how do you know if you can get a low interest rate on a consolidation loan or not? I don't want to take one out unless I know it is going to help me!

Posted on July 3, 2009 at 1:52 am If you take out a home equity loan that would definitely give you a lowered interest rate compared to other loans out on the market, that's for sure. But it's a much riskier deal, because you'd be putting up your home on collateral.

Posted on July 3, 2009 at 2:25 am I've heard that when you borrow a home equity loan, the payment amounts don't go towards the pricipal, but just towards the interest? Is that true? I wouldn't want to get a loan like that if I'm just paying for the interest

Posted on July 3, 2009 at 3:11 am That is actually one disadvantage that obtaining a HEL has--some of these are "interest only" loans, meaning, your monthly payments are going towards the interest of the loan only, and in turn do not reduce the principal amount that you originally borrowed. As a result, you'd be making payments for years, only to still owe the full amount that you originally borrowed.

Posted on July 7, 2009 at 6:58 am Ho do debt consolidation loans work if you have really bad credit?