My two cents: Debt Consolidation Loans (DCLs)

  • Published
  • By Cheryl Vedvig
  • 5th Force Support Squadron
MINOT AIR FORCE BASE, N.D. --  I have decided to provide a financial thought, or if you will my two cents, on a money topic every once in a while. I want to talk about Debt Consolidation Loans. I have seen numerous clients in the more than eight years I have worked with the Airman and Family Readiness Center that have considered DCLs.

The reason these loans are so attractive to people is as follows:

· Lower monthly payments
· They offer instant financial relief
· They are convenient because you can combine several credit payments into one
· It eases the need to keep track of payments for multiple creditors
· If creditors are calling, it reduces and or eliminates those creditor's bothering you

The following reasons these loans are NOT a good choice are listed below:

· Many times when taking out a DCL, you are taking unsecured debt (credit card) and using   your assets like a home as collateral to pay off those debts
· You are not getting rid of debt you are simply reshuffling it around
· These loans can damage a borrowers' credit score
· If borrowers are not careful to read the fine print there can be hidden fees and other high costs associated with these loans
· Although payments may be smaller in the end many times you pay more for the credit you had because the payments are now extended over a longer period of time

It is true DCLs offer instant financial relief. However, many people that make this choice resort to old behaviors of borrowing even more money because they have made it comfortable to do so. They often find themselves in a deeper financial hole than they were in prior to securing a DCL. What is the saying? No pain no gain. It's important to know there are ways to get a debt reduction plan in place to pay those creditors off. If you can't do it on your own, call the Airman & Family Readiness Center today at 723-3950, for we have the tools and information to put together a plan that will work for you.