Debt Consolidation Loans Improve Your Cash Flow and Your Credit

By Gina Pogol
Mortgage Credit Problems Columnist

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You're finding it harder and harder to pay your monthly bills. When even the minimum payments are more than you can handle, a debt consolidation loan can lower your payments and protect your credit rating.

Don't let fear or embarrassment keep you from acting now. Debt consolidation services exist because borrowers need help, and there is nothing to be ashamed or afraid of. Start early, and avoid missing payments and getting a bad credit rating.

How to Choose the Right Debt Consolidation Loan

Here are some questions to ask when deciding if a debt consolidation loan can help protect your future and your credit rating:
  1. What are the terms and interest rate of the debt consolidation loan? It's easy to get a debt consolidation quote online from a reputable lender. Check with several, and compare the rate and terms with what you're paying now. The interest rate should be lower. Some lenders lower your payment by stretching out your loan over a longer period of time. This is not a true savings if your rate doesn't also drop.
  2. Should I put up my home to secure the debt? Using your home equity to get a debt consolidation loan often makes sense. In many cases, you can deduct the interest on your taxes. However, consider your ability to repay this loan. If you end up filing bankruptcy, your credit card debt may be discharged entirely. Loans secured by your home are not usually discharged by bankruptcy. You could also lose your home in a foreclosure if you don't make your payments.
  3. Am I willing to change my behavior? Taking out a debt consolidation home loan only works if you stop doing what got you into trouble in the first place. If you keep spending and run your debts up all over again, you will find yourself worse off than before.
By taking action early, you can protect your credit rating, save yourself a lot of anxiety, and start managing your debt more wisely.

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