When to Beware of Debt Consolidation Loans (Part 1)

July 15, 2013

Borrowers considering debt consolidation loans should take the time to understand what they are getting themselves into in order to avoid burying themselves in deeper debt.

Borrowers considering debt consolidation loans should take the time to understand what they are getting themselves into in order to avoid burying themselves in deeper debt.

For borrowers struggling with debt and who can’t seem to get ahead, the option of taking out a debt consolidation loan may be especially appealing, as companies that offer these types of loans may promise lower interest rates, a convenient once-a-month payment for all debt and overall lower monthly debt payments. However, with debt consolidation loans, the old cliché – if it seems too good to be true, it probably is – certainly rings true, and for some borrowers, debt consolidation loans may do far more damage to their finances than offering help. As a result, it’s critical that borrowers who are considering debt consolidation loans take the time to understand what they are getting themselves into before securing one of these loans.

Possible indications that debt consolidation loans may not be a good idea for borrowers include that these loans:

  • Are not effective alone at helping borrowers get out of debt – Although debt consolidation loans may be able to streamline the debt repayment process for borrowers, many are misguided into believing that these loans will be a one-stop fix for all of their debt and financial problems. This is simply untrue. In fact, some research has indicated that approximately 70 percent of borrowers who opt or debt consolidation loans will have the same amount of debt – or even more debt – a few years down the line. The reason for this is that many borrowers do not take additional steps to change their financial habits after securing these loans.
  • May require borrowers to use their homes as collateral – When debt consolidations loans involve high-limit lines of credit or home equity loans, borrowers may be forced to put their home up as collateral. This means that, should borrowers default on their debt consolidation loans in the future, they could lose their homes via foreclosure.

Colorado Bankruptcy Lawyers

If you are overwhelmed by seemingly insurmountable debt and are looking for a financial fresh start, contact the trusted Colorado debt relief and bankruptcy lawyers at the Law Office of Jon B. Clarke, P.C. Our experienced legal professionals are committed to providing each of our Clients with the debt relief assistance they need, and we will work tirelessly to ensure that our Clients’ cases are resolved as favorably and efficiently as possible. For a thorough assessment of your situation, along with expert advice regarding the best manner in which to move forward to unburden yourself from debt, call us at (866) 916-3950.

Categories: Bankruptcy, Blog, Debt Consolidation Loans, Debt Relief, Denver Debt Counseling Services, Financial Tips