Should I Get a Loan to Clear My Debts?

It's a good question, "should I get a loan to clear my debts." The answer is, it depends. What needs to be determined is if there's any benefit to getting a loan at all. The lower the debt load, the less beneficial consolidation is. And even when there is a larger debt amount, a loan still may not be a great idea. Interest rates can be higher than they would be if the balances were left where they were originally.

Potential Issues with Loan Consolidation

Consolidating debts is not something that a debtor can do and assume that all is hunky dory. Research is needed to find out what the terms of the loan are. Will the loan last longer than had the debt been left in their original locations? How much is the interest and will it be higher than before? These are common problems that come with putting all debt into one place. Many people jump on them because it will lower their monthly payments and seemingly relieve the financial burden. The reality may be much different, causing the debt to be stretched out for far longer than it should have been.

Fiscal restraint is another problem, especially with credit cards. The cards are still there and they're still usable. Can the debtor resist using them, or will they get themselves back into the same place they started from? A potential exists for the debtor to have a consolidation loan payment and large credit card payments, once again. This is not a case of being responsible with money.

Alternative Debt Solution

There is more than one way to eliminate debt. Taking a different method will not only eliminate the debt, but also teach the debtor how to not get into these types of situations.

• Debt counseling. Counseling sometimes provides loan consolidation as well as teaching the debtor how not to get into difficulty again. These make a good option for those who were never taught how to handle their money and want to keep themselves out of financial trouble.
• Balance settlement. The drawback to settlement is that the debt has to be 90 days or more delinquent, causing a hit to the credit rating. However, the settling of the debt for a lesser amount will counteract the delinquencies. Passing some time before making another financial move will also help cure the rating.

Legal Help

There are lawyers who are experts in debt issues that can help with finding a solution. A debtor can work face to face with a lawyer to find solutions that make sense. It makes for a better alternative than being a case file in someone's drawer.