The majority of folks see debt as a financial trap that borrowers are unable to escape without paying more than the money that was given. There are two primary kinds of debt:
- Unsecured loans
- Secured loans
There’s a new kind of loan floating around – Debt Consolidation Loan – which is a single loan that borrowers used to pay off other debt they have, be it from the same lender or various ones. A Debt Consolidation Loan means you bring all the other loans into one manageable debt.
Debt Consolidation Loan: Is It Worth It?
Most people hate the idea of having to pay different lenders each month, so they choose to get a debt consolidation loan that brings them all under one loan. There are several features and advantages of this type of loan, both for loan lenders and borrowers. Of course, it does offer some challenges to average income borrowers. The loan has some risks that can potentially lead to a financial crisis for people who need several loans from several lenders. The biggest debt consolidation loan risks are:
- High-interest rate
- Credit score damage
- Variable payment traps
- Consolidation leading to more trouble