Debt Consolidation Loans are one of the most common solutions people think of when they fall victim to financial problems. The sad fact is that about 65% of people that obtain a
debt consolidation loan, in a short time, find themselves with a larger debt and in deeper financial trouble than they were before.
You Can't Borrow Your Way Out of Debt!
When taking out a debt consolidation loan you will be asked to secure the loan against some form of asset, like a home or vehicle. At this point you have just gone from an unsecured loan to a secured loan and have put your personal assets at risk. Currently, your credit cards are unsecured loans, meaning that no property or assets act as collateral on the debt. If you default on a credit card debt, your creditor can harass you, they can send threatening letters, they can get a judgment against you, but they can't take anything away from you. Once you have secured a
debt consolidation loan with property or possessions you have given your creditors an advantage they didn't have before.
The bottom line: these loans are usually NOT a viable solution to get out of debt. If you are still considering a consolidation loan as an option, please do careful research before jumping into a commitment you may regret for a long time.
