DebtFree Playbook

Your bills keep coming in. Letters asking for payments on your debts arrive almost daily and lie scattered around your house. Paying them takes just about all the money you make - or worse, it takes every penny.

Then you get a really nice letter about an Unsecured Consolidation Loan. That would help, wouldn't it? Ease the pressure on your debts a little. Help you get out of debt, they promise!You have credit card bills screaming for attention, along with store cards and utility bills. Worse than that, Christmas is just around the corner, not to mention the money you owe to your brother-in-law and the fact that you're going to need to service your car soon. So you read that letter about a Debt Consolidation Loan again. It looks attractive. It may be a solution to your debt problems, you think%u2026

But at what cost? Lenders who offer unsecured debt consolidation loans don't require any collateral against the loan - which is why they are called unsecured loans they're not secured on your property on any other assets you may own. They look at you and your credit and employment history; and if you've been making regular payments to all your creditors, and you've got a fairly stable employment history, they may consider you a good risk.

And here lies the danger. Because they are taking a risk with you, (because the loan is unsecured), they can charge a higher premium on the loan; i.e. a higher interest rate. And because you need the money, you may be tempted to look only at the monthly cost of the loan, rather than the full term of the debt consolidation loan, and what that consolidation loan will cost you in the long run. Which will be a great deal of money.

So you need to ask yourself: Is a Debt Consolidation Loan the best option, both in the short term, and over the long term? You need to consider what may happen if you default on an unsecured loan. And whether the debt consolidation loan is actually going to help you, or encourage you to spend more. A number of people I have spoken to have told me that as soon as they got approved for a debt consolidation loan, they started spending more money! So sometimes a debt consolidation loan only aggravates the debt problems, rather than acts as a debt solution.

As I've said before, you need to look at the cause of the debt problem - yourself! You are the one in charge of your spending. As soon as you take charge of that, you may be in a better position to choose whether a debt consolidation loan is in fact the best option, or whether there is a much better debt solution.