Many individuals who have a large amount of debt often use a consolidation loan in order to group various debt sources into one loan, which obviously brings only one monthly payment. Reports indicate that more Americans are paying off their debt and, for some, a debt consolidation loan is the method which they are using to do so.
However, there are those debtors who fail to realize that paying off debt may become more costly if a consolidation loan is used. While the opinions on this matter vary, there are financial advisors who warn consumers about using a debt consolidation loan, even if that loan comes with a low interest rate.
Despite the fact that a consolidation loan may come with an affordable monthly payment and interest rate, the large principal amount and repayment timeframe are usually the trouble. Even a small interest rate can cause problems if left unchecked over a long repayment period and it can end up costing a consumer more if only minimal monthly payments are met.
Paying off debt separately is often advised by some financial gurus, as this can actually be more affordable than a consolidation loan. Methods for fighting debt separately range from paying off the smallest debt source to the highest or fighting debt from the highest interest rate to the smallest.
Again, there are cases to be made for paying off debts separately since these smaller amounts can be combated more easily than a large principal amount, but anyone who runs the risk of missing payments on their debt sources may be better off to seek a consolidation loan. In the past there have been many who have chosen to pay a little more on their debt through a consolidation loan rather than miss payments or do damage to their credit score.