Debt consolidation loans are often considered to be the perfect method of getting rid of a huge chunk of debt all at once. Consider the luxury of getting the mail and instead of looking at five or six credit card bills you are only looking at a utility bill and a bit of junk mail. In addition to the foregoing, if you find that you are seriously falling behind in your bills, this sudden freedom is a like a breath of fresh air.



Yet these debt consolidation loans are not always a good idea. Here are some instances in which it would be wiser to stay away from them: if you are taking out a second mortgage to repay your unsecured loans, you will find that the toaster you put on the MasterCard is suddenly being financed for about ten years. Financially, this does not make a lot of sense. It would make more sense to sell the toaster and then use the proceeds to pay off the charge card.

If you are planning to keep the charge cards that you are paying off, you might as well not look to debt consolidation loans to pay them off. The odds are good that within a few short months you will once again use them and from there it is only a small step to actually maxing them out. Thus, only use debt consolidation loans for credit cards if you are willing to cancel the cards after paying them off.

When debt consolidation loans are actually second mortgages, they lose their attractiveness if they are adjustable rate loans. Many of them are, and you may suddenly find that the loan you took out is a lot harder to repay than the bills that that were paid in the first place. As the adjustable rates keep going up, you will also lose any of the benefits that came with paying off the high interest rate credit cards, but instead you may have just exchanged one high interest debt for another.

Last but not least, debt consolidation loans are a lure that many a lender will dangle in front of desperate consumers as a way to get rid of collection calls and wage garnishments. While it is true that in the short term this is indeed the effect they may have, in the long term some of these loans, especially if they are issued by disreputable lenders, carry interest rates that are just below the usury rates. These lenders specialize in marketing to the distressed, and soon it will turn out that their loan is just as demanding as the others. Furthermore, since sometimes these lenders will require co-signers, the lender will not experience any potential problems and thus will be most unwilling to work with a borrower who might not be able to make the monthly payment, while a credit card company may have been willing to make adjustments to their rates to help. However, if you must take one out be sure you know exactly what you are getting yourself into!