Posted: 1 Jan

The Pros and Cons of Getting a Debt Consolidation Loan

The Pros and Cons of Getting a Debt Consolidation Loan

Debt hanging over your head can be a massive burden to bear. If you have more debt than you can handle, a debt consolidation loan may be the right choice for you. This kind of loan will allow you to pay off all of your debts and wrap them into one easily managed monthly payment. Debt consolidations loans have pros and cons; let's take a look. Contact us to learn more.
 
Pros  

  • You don't have to worry about paying off multiple accounts every month 
  • You can organize the loan so that your payments are more manageable. 
  • Your interest rate will likely be lower 
  • If you still have good credit or collateral, the process will be easy 

 

Cons  

  • It can lead to additional debt 
  • You could lose your home or car if you default on the loan 

 

What Should You Choose to Do? 

 
If you are heavily saddled with debt and want nothing more than to get out from under it, you should consider a debt consolidation loan. Do you have too much high interest rate debt that you want to pay down immediately? Are you behind on payments? Will it cost you more to secure and pay off a loan than to pay off what you are currently holding in debt directly? Are there any fees associated with the loan? 

 
With all of this in mind, the best options for people looking to consolidate debt are usually a type of secured loan. Many people with a large amount of high interest debt will choose to take out a low interest rate home loan as their choice for a debt consolidation loan. A home equity loan is a type of secured loan where you use your home as collateral for the loan. 

 
Other types of debt consolidation loans can be granted by banks. Still, they will usually carry a much higher interest rate. If all of your debt consists of high interest rate products like credit cards, a personal debt consolidation loan from the bank could work for you. You will, however, need to have good credit to go this route. 

Ready for a Remedy? 

 
With poor credit, a secured loan will be the way to go for most people. Having a lot of debt is rarely a good thing. Looking at all of your options and working to remedy the problem is the best thing that you can be doing right now. If you think a debt consolidation loan is a right choice for you, give BMC Mortgage & Investments a call so that we can match you with the perfect lender.

Learn More About USING YOUR HOME EQUITY TO QUALIFY FOR A LOAN