Are Debt Consolidation Loans Bad?

Carrying a heavy debt load isn’t good for anyone’s financial wellness. If you’ve decided to get out of debt, you may have already come across debt consolidation in your research. With so many opinions, misconceptions, and a lack of financial literacy, finding helpful and accurate information can be hard. Our debt counselors understand that. So, ACCC is here to help answer one question: are debt consolidation loans bad?

Are debt consolidation loans bad? The answer…it depends on your situation. Keep reading.

Are Debt Consolidation Loans Bad?

What are debt consolidation loans?

Debt consolidation occurs when an individual combines all of their unsecured debt into one new loan. Unsecured debt can include credit cards, medical bills, and personal loans. Through a debt consolidation, consumers make one monthly payment and don’t have to worry about multiple payments and due dates.

Are they a viable solution?

Debt consolidation is a viable option for consumers who are struggling to keep up with multiple payments to different creditors. Debt consolidation can help consumers become more financially organized and pay down debt faster while benefiting from lower interest rates and other advantages.

To figure out if debt consolidation loans are for you, it’s important to assess your financial situation. Take into account how much debt you’ve accrued, any damage to your credit score, and whether you’re ready to address the habits that contributed to your debt in the first place. The more honest you are about your debt, the easier it will be to overcome it.

Bottom line: Are debt consolidation loans bad?

Let’s be clear that every debt relief option has pros and cons. And we’ve seen some of the pros to debt consolidation. So why do people ask “are debt consolidation loans bad?”. The major point of contention with debt consolidation is whether users qualify for a worthwhile loan. Securing an interest rate lower than your current loans is key to making consolidation an effective debt reduction strategy. So, if you have poor credit, it may be difficult to find a lender who will offer the low rates that makes debt consolidation beneficial. And, like other options, a debt consolidation plan is not the right choice for every consumer.

If you are seeking debt consolidation, consider enrolling with a nonprofit credit counseling agency like American Consumer Credit Counseling (ACCC). Some consumers choose to pursue debt consolidation without all of the information and don’t realize they could be taken advantage of. By enrolling into a debt management plan with ACCC, you will receive other benefits that may include waived fees, ending collection calls, a reduction of finance charges and over-limit fees, and paying off your debt faster.