The advantages and disadvantages

Debt consolidation loans are incredibly popular. The advantages are plain to see:

• Debt consolidation loans help reduce the number of bills and due dates to manage
• Debt consolidation loans may bring double-digit interest rates down to single digits.
• Debt consolidation loans often relieve a budget crunch. By bringing monthly payments down, debt consolidation loans free up cash for current household needs.
• Some options - the cash out refinance and second mortgage types - may bring income tax benefits along with debt consolidation. (Consult your tax advisor for details)
  

Debt consolidation loans carry some risks, and borrowers need to be honest with themselves to avoid being snared.

• Taking on a debt consolidation loan without a corresponding change in budget and spending habits enables many people to plunge even deeper into debt.
• Most debt consolidation loans extend the length of time the borrower has to repay by years. So, even with a lower interest rate and possible tax deductibility, the ultimate cost of borrowing may be higher with a debt consolidation loan.
• Debt consolidation loans can deplete home equity-emptying assets that could be used to handle true emergencies or lowering your standard of living at retirement.
• Credit card balance transfers can be over-used, resulting in a shell game where balances are never reduced, just shifted around. And without consistent, on-time payments, rates can rocket right back to where they were-or higher.