What is Debt Consolidation? - The Hidden Dangers

What is Debt Consolidation? It allows you to roll all of your debts into one (a consolidation loan) and you now only need to make one payment each month.

It has now become commonplace to think that a debt consolidation loan is the right step forward due to a lot of television advertising that now takes place. The TV adverts simply use a known trusted celebrity to endorse their product, such as Carol Vorderman.

The viewer thinks, "Well, if Carol Vorderman recommends the product and she is good with numbers, then this must be the best solution."

- Not necessarily

One thing you may miss when watching the television adverts is the small print, "only homeowners need apply"

What most people do not realise is that these tend to be secured loans, which means that it is secured against your home. If you fail to keep up payments with the loan then you will lose your home.

Why Do People Recommend A Debt Consolidation Loan?
The main reason given is to simplify the payments to all of your creditors with one payment per month. Also, you may find that the debt loan has a lower interest rate than for instance your credit cards. So, people recommend that you pay off all of your credit cards with a loan because you will not be paying as much interest.

Debt Consolidation Loans Lead To Deep Debt
However, even though a loan can have a lower interest rate than your credit cards, think about this, most people who use this method, will clear their credit cards, take out a secured consolidation loan and will begin paying one monthly payment. How much willpower do you think is needed to not spend any money on your now cleared credit cards? - Good luck - the willpower required for this is massive!

This type of loan (according to credit action) leads three in five people into deeper debt.

What most people do not realise as they get deeper and deeper into debt is that their homes are at risk if they do not keep up repayments on the secured loan. Typically, a person who has cleared their credit card debts and taken a consolidation loan will begin spending money again on their credit cards and rack up more and more debt, which eventually leads to the problem of not being able to keep up the payments on the loan and eventually leads to the loss of their home.

If you have credit card debts, remember that these are unsecured debts, so you cannot lose your home from not paying your credit card debts, so even though you can potentially save money by paying off your credit cards using a consolidation loan, the risk is much higher as you could potentially get deeper and deeper into debt and also lose your home.

If you have debts and you are worrying how to clear them, the first step you should take is to get some professional advice and not take a debt loan. You may be surprised at the options available to you.

If you are considering a debt consolidation loan and are having problems with serious debt we can provide impartial expert debt advice. It's always important if you begin to have debt problems to contact an expert as early as possible. An expert can put your debt worries at ease and help you find a solution to your debt problems quickly.

You can speak to one of our UK debt advisors with a 100% free consultation. No matter what your debt situation, we can help you find a solution: http://www.professional-debt-solutions.co.uk