When debt looms large and threatens to vanquish all that we have worked for a debt consolidation loan can throw us a lifeline. Consolidation loans reduce interest rates on unsecured debt such as credit cards and signature loans. Instead of a plethora of monthly payments that barely touch the principal, consolidation loans provide one payment that is significantly lower that the sum of all its parts. Often the first instinct is to grab onto the lifeline consolidation loans provide.



And they can be, but only if the borrower recognizes that this is an extreme measure. Debt consolidation treats the symptoms; it does nothing to cure the overall disease. The disease, for most people who seek relief from debt with a consolidation loan, is overspending. If debt consolidation is not accompanied by a complete change in spending habits, debt overload will return. And when it does, the options for relief dwindle.

While it is true that debt consolidation loans reduce the high interest rate associated with credit card debt, in most cases it does not actually reduce the amount of interest you pay. Debt consolidation loans merely distribute the debt and the accompanying interest over a wider span of years. Debt consolidation loans give you payment relief and not much more.

Another important thing to be aware of is that what was once unsecured debt is not secured, usually by your home. Debt consolidation loans can double your risk of losing your home and can make your home more difficult to sell, should you need or want to. When real estate market values fall, you may find yourself in position where you have far more debt than equity.

Debt consolidation loans can put a family back on the road to financial solvency. But only when accompanied by a radical change in how the family spends money. Financial counselors recommend that the family cut up all but one credit card when the credit cards are cleared by the consolidation loan. Debt consolidation loans will ease the symptoms of too many high interest debt payments going out each month, but only by spreading the debt out for a longer period of time.