Many people nowadays consider taking debt consolidation loan to organize all their accumulated debt. Taking a consolidation loan is a wise decision; however you need to make sure that you control your spending habit before taking this kind of a loan. The commitment required for these loans is quite different from those of pending credit card bills or unpaid bills. By organizing all these debts into a consolidation loan, the risk associated with default on each of those individual debts is also erased.

Reduced Interest Rate
This is one of the biggest advantages of a debt consolidation loan. Such loans have very low or nil fixed costs and hence the lenders can afford to offer reduced interest rates. Generally all consolidation loans are secured ones meaning some collateral is kept as a security to cover any default. So the overall risk to the creditor is reduced and hence he can offer comparatively low interest rates to the customer.

Single Monthly Payment
If you have 4 different credit cards and several pending bills every month then managing them all can be a huge task. Moroever, if you falter in even one of them you run the risk of heavy penalties on late payments or bad credit points for your credit history. A debt consolidation loan pays off all such smaller debts and makes you free from managing different creditors and their harassing calls. Your only worry is the one payment for the consolidated loan.

Improved Credit Record
A consolidation loan helps you manage your monthly payments better and this can maintain a better credit rating.

Disadvantages Of Debt Consolidation Loans
Most debt consolidated loans being secured ones; the lender has collateral they he can confiscate in case of default on the loan. So while these loans help you gain control over your debts, they can prove quite risky if you fail to make the payment.