By John Campbell

The closer your combined debts are to becoming unmanageable the more attractive a debt consolidation loan may seem. Knowing where to look and what to look out for with one of these loans will get you the best deal and help lower your payments.

You may want to begin your search for a debt consolidation loan with some of your local credit unions. Credit unions usually offer better loan rates and more flexible deals than banks. Make sure to get any offers in writing and compare these offers with other lenders you inquire with. There will be numerous banks and online lenders that may also offer you some competitive rates with terms that are favorable to you.

Once you have some offers in hand you can begin comparing the various fees, interest rates and any terms and conditions of each offer. Each lender will likely charge a fee to process the loan and some may also charge commission fees. The larger the lender fees and any commission fees may be, the more unattractive a debt consolidation loan will be.

The interest rate on any one of these loans should be much lower than the rate on your various debts you want to consolidate. You should also lock in your interest rate on the loan at a low fixed rate. Avoid lenders offering variable rate loans as the interest rates could fluctuate to your disadvantage.

When reviewing the terms and conditions associated with a debt consolidation loan you should steer clear of any promises that seem too good to be true. Any lender that promises to eliminate your debts will likely wind up lowering your credit score and make it more difficult for you to get out of debt in the long run. If the lender requires you to put up your car or your home as collateral for the loan your risk will also be significantly higher. You’d be better off defaulting on some credit card debt than defaulting on a debt consolidation loan with your home as collateral. If you can’t keep up with the payments you could wind up in foreclosure.

The goal with any debt consolidation loan should be to lower your interest rate as well as your monthly payment on your debts. For each offer you’re considering you need to compare what you’re currently paying on your debts with what you would pay with a debt consolidation loan. You don’t want to wind up spending more on a debt consolidation loan. Regardless of your choices, you’ll still need to learn how to budget your money better if you ever hope to lower your debts and improve your financial situation in the long run.

Debt consolidation loans can be an excellent way to improve your financial situation in the short-term. Knowing where to look and what to look out for will help you get the best deal and lower your monthly debt payments significantly. If you really want to improve your finances in the long term the rest will be up to you.

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John Campbell is the writer and editor of CashBuzz, A financial portal for the rest of us. Check out cashbuzz.com for the latest articles on money management and tips and tricks that can help improve your finances. This article may be reprinted on your Web site if the copyright, author information and active link are included.