You have too many debts, and now you’re planning to apply for a debt loan — one big loan to pay off your debt. It seems like the logical thing to do, in part because you’re probably feeling a bit desperate, and the idea of owing one lender, rather than four, or five or 10, is comparatively a pleasant one.
Everybody’s situation is different, and maybe you’re in the rare instance where it will work. But here are three reasons why you should consider not taking out a debt loan.
The interest you get isn’t likely to be low
You’re getting a loan to pay off other loans, which means you’re burdened with debt. A lender will see that, and your interest rate won’t be one of those sweet, teaser rates we all see advertised. It’s going to be unpleasant, like 29.99 percent, which may be higher than what you already have. So while you may feel like you’re getting some short-term relief from your debt loan, there’s a good chance that you’re going to owe much more than you do now.
This is simply a bad path
Think about it. If this debt loan becomes unmanageable, what then? You’re beholden to one lender for a ton of debt. You probably won’t be able to transfer the money elsewhere at that point. You really might be better off managing several relatively small problems than creating one big problem.
You may not even use it for your debts
If your debt is difficult to control, you may be late on other bills. There is the chance that if you successfully get a loan, you may decide that with all of this money in the bank, it might be smarter to pay off one credit card and then, instead of these two other credit cards, catch up on your mortgage or utility payments instead. While those payments are important, you’ll have a massive debt loan to pay off — and some of the other debt that you were trying to get rid of in the first place.