As a leading debt consultant service, 4 Pillars provides education, support, and professional debt consultants to help individuals and couples get out of debt. Often clients come to our professionals with an idea of the right option or tool to use to address their debt. One of the most common recommendations seen online to resolve debt problems is to use a consolidation loan. While these loans are a good option for many individuals, they are not always the right solution.
What is a Debt Consolidation Loan?
A debt consolidation loan is a large loan to cover paying off all or most sources of debt for the individual. In taking out this larger loan and paying off credit cards, unsecured debt, or even secured debt, the individual only makes one payment per month, with a set interest rate. Most consolidation loans recommended by our 4 Pillars debt consultants have a significantly lower interest rate than credit cards. This helps to speed up the repayment process as interest is not continually adding up on outstanding balances.
The Potential Considerations
When talking with a professional from 4 Pillars, understanding the total loan and repayment plan for a consolidation loan is critical. The borrower must be able to make each and every loan payment on time and in the full amount to avoid additional fees and penalties. The consolidation loan should also cover most, if not all, debt. Simply adding another payment is not helpful and can create additional debt for many consumers.
