Debt consolidation loans, used properly, can be the solution to a financial nightmare. If you have lots of different debts such as loans, credit and store cars, HP etc, all paying varying rates of interest, then a debt consolidation loan could be for you.
These loans do exactly what it says on the tin – they consolidate all your debts, and pay them off, leaving you with just on monthly commitment to meet each month and, normally, at a larger rate of interest.
The benefits are two fold you pay less in interest overall (for example, a typical loan is around 78% APR, while a credit card is anything from 13% APR upwards) and you also have the physiological benefit of knowing that just one payment has to be serviced every month as opposed to worrying about paying bits and pieces here and there.
That is how debt consolidation loans should be used. So that at the end of the term, you have paid your debts off and are debt free.
However, you do need to have financial determination and restraint if this is the route you go down, as sadly many people accumulate further debt. Many people pay off their existing debts and replace it with a debt...
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