You could be considering accepting one of the hundreds of advertised proposal on TV and newspapers for a personal loan which will combine all your debts into a single account for easier management of payments. Prior to calling them and filling out that form, you have to assess your present state of affairs and the possible repercussions on your finances. Because all these proposals are sugar coated to entice you to get their facilities yet they are not as perfect a solution as the lending companies make it appear to be.br> It is but natural for a lot of individuals to look at exceptional deals with cynicism, and ask, "What’s the catch?" For most of us, when it comes to consolidation loans, we generally just look at the amount that can be borrowed and the corresponding monthly payments, disregarding the other terms and conditions of the contract.

Loan companies know the general psyche of a potential borrower only too well, so the proposals highlight only the loan amount and the monthly payments to determine which loan term we can afford to pay, without detailing what portion of the payment is actually going to the principal debt.

We have been made to believe that by combining all our loans, it will simplify debt repayment. What we do not look into more closely is how many years will it take you to pay back that loan and how much the total payout will amount to. No matter how light the monthly repayment scheme is made to appear, computing it against the total number of months, for instance 60 of months, of repayment could give an unbelievably staggering amount.

Put the payment terms in an annual setting and see if that will not change your entire perspective. After doing that, the next question you will ask yourself is will you want to be saddled with such a debt for five long years. If that looks okay with you, the next thing you have to do is compute how much will this consolidation loan going to cost you given the 5 year term. This might jolt you to reality and change your mind completely.

Generally, interest rates for these types of loans fluctuate from year to year. Sometimes they could go down and that will be good for you, but most of the time it is on the uptrend. So if you finally decide to consolidate your debt, don’t just look at the monthly repayment affordability but the total amount it will cost you for the entire loan term. Another question you should ask is if you are able to, can you pay the loan in a shorter term than that which is stipulated, because if you can, then it is a good option to take.

Clearing all your debts in one action will actually give you a feeling of relief and happiness, but should come with a warning.

NEVER EVER even think of using your cleared credit cards again or you will suffer the consequence of ending up in more debts than you can afford to pay. This will totally put you in a financial glitch that may take you several years to recover from.