Consolidation Loans - Should You Consolidate With Yet Another Loan ?

Consolidation Loans - Should You Consolidate Your Credit Card And Loan Debt ?
Loans and yet more loans! It seems that the TV, radio and internet are crammed full of consolidation loan adverts enticing us to consolidate our debt and say goodbye to our debt problems in one easy call to a loan company. Is it really that simple though?

A Debt Advisors Viewpoint Of Consolidation Loans

Having been a debt advisor for more years than I care to remember I have dealt with the issue of debt consolidation loans and other types of loans time and time again. The reason why consolidation loans are so attractive is that they promise the world in as much as they will apparently clear bad credit and debt problems, wrap up all of your other credit cards and loans into a single payment and allow you to sail off into the sunset debt free and without a worry in the world.

Well a much smarter person than I (my grandfather) once gave me a smart piece of advice when I was but a small lad, 'if it sounds and looks too good to be true then it probably is' His advice within the context of consolidation loans is only too true I have found during my years of working as a debt advisor for the debt help organisation Myvesta UK and Ireland.

The main problem with debt consolidation loans is the fact that the monthly repayments are often realistically too expensive for people to maintain and a good debt advisor will be able to demonstrate this to their clients by drawing up a realistic and sensible monthly budget plan that accounts for all of a persons regular spending commitments along with loans, credit cards and other debt obligations.

Being In Debt Is Tough But Consolidation Loans Are Not The Answer

In a recent article I wrote about how the credit crunch is affecting the ability of people obtaining bad credit loans with a view to consolidating debt. The main points I made in that article were that consolidation loans are being made more restrictive to applicants because of tighter lending criteria as a result of the credit crunch and why this was not necessarily such a bad thing for people with debt problems. I hope that the article was helpful for readers who are considering the pros and cons of a debt consolidation loan as it served to present the viewpoint of consolidation loans from a debt advisors perspective.

Debt advisors have a unique insight into the psychology of debt as they speak with and help so many people facing financial difficulties on a daily basis. A common challenge amongst debt advisors is to try to enable their clients to understand the reality of their true cash-flow position in order to understand the debt management options that are available to them. Quite often debt advisors point out that debt consolidation loans although initially a seemingly attractive offer are actually not a sensible option when a persons monthly budget has been examined closely. In particular secured debt consolidation loans are of prime concern and a good debt advisor will always ensure that a client is fully aware that a secured debt consolidation loan serves to swap unsecured credit debts to a larger debt that will be secured against a persons home equity. This will inevitably put that persons home more at risk from repossession if they are unable to keep up with the contractual consolidation loan debt repayments.

The Credit Rating Issue

Another common problem for debt advisors when discussing the debt consolidation loan option with clients is to try to get the client to understand that credit reports whilst are somewhat important are not that important that they should sway a person to take out a debt consolidation loan in order to keep their credit report more positive. This is often difficult because people are often very precious about how their credit report is viewed and believe that it is of the utmost importance to maintain a good credit report at all costs.

However struggling to maintain a good credit report can sometimes be a false economy if fundamentally their is a serious debt problem that need to be contended with. Debt consolidation loans may enable a person to maintain a better credit rating for a period of months but if the underlying issue is that a person simply has too much debt and the debt consolidation loan repayments are not actually affordable then it is typically only a matter of time before missed payments occur affecting both their credit rating and, in many cases of secured credit consolidation products, putting a persons property at risk of repossession.

A good debt advisor will always point out the entire range of debt management strategies open to individuals with financial problems that approach them for help. This includes talking about the merits of taking out a debt consolidation loan as well as the pitfalls. Ultimately the role of the debt advisor is to assess a persons situation after preparing a monthly budget with the client, advise them as to the range of formal and informal options and ensure that the implications of all the options are fully understood.

As debt consolidation loans in Ireland become more heavily advertised no doubt many people will be attracted to the option however it will always be worthwhile contacting an independent debt advisor in order to go through the budget generation process to obtain impartial debt advice before signing up for another loan that could serve to make a persons debt problems worse.

Source:http://myvesta.ie/articles/articles/36/1/Consolidation-Loans---Should-You-Consolidate-With-Yet-Another-Loan-/Page1.html