Debt consolidation loan – Things to think about when deciding

So I am sitting here at the kitchen table thinking to myself, ‘I have 5 credit cards that happen to be almost maxed out, a mortgage, medical bills that are piling up, two car payments and two kids who need orthodontic work.’ I get up and go turn on the television to get a dose of laughter from a sit com because right now I’m ready to bawl my eyes out. I cannot see an end to this mountain of debt.
Then on comes that annoying commercial… you know the one where the guy says,’I’m thinking of a number…’ I retort back to the television. ‘Yeah, I’m thinking of a number too and that number is the amount of times I want to bang your head against the pavement for having to listen to that commercial 100 times a day.’ Then I think to myself, ‘Why am I so upset?’ Well the fact is that that man is reminding me of everything I just wanted to get away from. So, I sit down and make a list of what I can do to help the situation. First off, I know I make enough money to pay the bills I have, and live pretty comfortably, but something has happened along the way. I got myself into debt, and rather than crying over spilled milk, I want to do something about it, so I go online.
It is there that I find my answer: a debt consolidation loan. I can put all of my debt into one monthly payment. Now, how do I make my decision? Well, I sit down with a pen and paper and write down all the pros and cons I can think of. And it looks like this.


Rather than making all those payments to the 5 different credit card companies, the hospital, the banks that hold the notes on the two cars, and the orthodontist, I could conceivably be making one single payment to one place. Ohhhhh now that sounds good to me. Score 1 point for the debt consolidation loan.
A lower monthly payment, typically the most common debt consolidation loan is what is known as a second mortgage, or the home equity loan (HELOC).  Since this is secured debt the interest rate will usually be lower than the rate of credit card loans. Lower rate, lower monthly payment and possibly I could pay this all off earlier than leaving it the way I have it now.  Score another point for the debt consolidation loan.
Tax Breaks: Interest paid to a mortgage can be used as a tax write-off. Woo Hoo who doesn’t like the sound of that?  And a 3rd point for the debt consolidation loan.
My credit report: I have heard that if I pay off my credit cards and keep them open, then my credit scores should go up. At last, the 4th point.

Now let’s see, we have 4 points in the Pros column, how about the cons column?

With an easier load to bear and more money left over at the end of the month, I could take that cruise I’ve wanted to take for so long and then I could go to Italy… Wait that would mean I’m generating debt again. So there is a con to doing that.  I’d be more apt to run up more debt. I have a friend who did this and she is in real financial trouble. Man this is hard, can I stick to a budget? Mark 1 point against the debt consolidation loan.
Wait, how long is this note for? You mean that I have to keep paying this for 15-30 years? Have I thought about it in terms of how much longer I want to have this debt around my neck? My car payments will be over in a few years. Mark the second point against debt consolidation loan.
If I get a second mortgage, I’ll be paying less but over the amount of time I’m paying, I’ll end up paying more than I would have if I just kept all the loans separate. Point 3 against the debt consolidation loan.
If something happens and I cannot repay this loan, I will lose my house. That means me and my kids and my husband will be out of luck. At least, if I had to walk away from the unsecured credit card debt all I get is a black mark on my credit. Point 4 against the debt consolidation loan.

In my situation it looks like I could go either way with the debt consolidation loan. This wasn’t a decision for me to make by myself, so I checked with my husband to see if he saw anything that I was missing.
I’m not going to say what my husband and I did because I don’t want to sway your decision about your situation either way. Only you can choose what’s right for you and your family. I’ll leave it at this: We’re doing just fine and there’s no need to bang anyone’s head against the pavement.