Debt Consolidation Loans Offer Many Risks, Few Rewards

Growing evidence suggests that debt consolidation loans offer many risks and few rewards. These once-popular debt relief tools are increasingly difficult to procure. Their cost continues to rise as credit remains tight.

Debt consolidation loans are credit facilities that enable borrowers to roll their existing obligations into single overarching loans. Debt consolidation lenders pay off their clients' existing lenders, reducing the number of creditors with whom they must deal. Borrowers who use debt consolidation loans usually make just one debt payment per month.

In many cases, borrowers with thousands of dollars in unsecured debts pay interest rates of 15 to 25 percent on those debts. Borrowers who have missed monthly payments on certain loans or credit cards may pay far more more than this. They may also be hit with fees that further swell their debt loads.

Many debt consolidation lenders tout their ability to secure relatively low interest rates for their clients. In some cases, borrowers who use debt consolidation loans may be able to cut their effective interest rates by 50 percent.

However, few debt consolidation lenders guarantee such savings. In addition, many may make misleading claims to attract new clients.

According to ExpertLaw, there are several key drawbacks to debt consolidation loans. These drawbacks may make these loans more expensive than other forms of debt relief.

Debt consolidation loans typically come with long repayment periods of five to seven years. This may negate any potential interest-rate savings by increasing the total amount of interest that borrowers must pay over time.

In addition, debt consolidation loans are difficult to find. Due to ongoing tightness in the country's credit markets, borrowers with sub-standard credit should not expect to be approved for these products.

Even borrowers with mediocre credit may have trouble finding affordable debt consolidation loans. According to Prosper.com, a leading peer-to-peer lending authority, annual interest rates for individuals with middling credit scores typically exceed 14 percent.

While borrowers with good credit are regularly approved for large loans, few such individuals require debt consolidation loans.

Debt consolidation loans (http://www.debtconsolidationusa.com/debt-consolidation) also come with strict terms. Few lenders tolerate missed payments on these loans. Many debt consolidation lenders initiate legal action against their clients after just one or two missed payments.

In fact, debt consolidation loans are a common catalyst for personal bankruptcy filings. For many borrowers, they may actually be counterproductive.

Debt Consolidation USA (http://www.debtconsolidationusa.com/debt-consolidation/debt-consolidation-usa.html) is proud to offer an affordable alternative to debt consolidation loans, credit counseling and bankruptcy. This proven debt relief method is known as "debt settlement." In the past, many of its users have seen their debts cut in just 24 to 48 months. The debt settlement process has a high rate of success and requires no initial investment.

To learn more about Debt Consolidation USA's revolutionary debt settlement plans, call them at 1-877-610-6990 or use their online form at DebtConsolidationUSA.com to request a free consultation.