How Debt Consolidation Loans Can Help You

Millions of Americans are finding themselves drowning in a sea of debt, not knowing how to stay afloat.

By the end of 2008, consumer debt in the United States reached $2.56 trillion, according to the Federal Reserve.

With so many people carrying so much debt, many consumers have tried to find ways to reduce their overall debt, from seeking debt arbitration to filing for bankruptcy.

However, there is an option for those faced with mounting debts that will not leave a black mark on their credit report.

Debt consolidation loans can provide a way for those challenged with unmanageable debt to find a way to better manage their finances and to pay down their debts quickly.

How Debt Consolidation Loans Work

Through a debt consolidation loan, a consumer is able to consolidate his or her debt from several creditors into one new loan.

A debt consolidation loan can be secured in three ways. Borrowers can refinance their homes with a cash-out option to cover their debts; they can secure a home equity loan; or they can obtain a personal consolidation loan.

One of the benefits associated with a debt consolidation loan is a debt consolidation loan can simplify one's finances significantly. Individuals carrying a large debt burden often juggle multiple payments to multiple creditors every month.

This juggling act not only causes stress for the consumer, but it also can lead to the borrower inadvertently missing a payment or making a payment late, resulting in an even greater debt burden as well as a tarnished credit rating. With a debt consolidation loan, however, the borrower has to worry about only one payment each month.

A debt consolidation loan also can result in lowering the borrower's total monthly debt payment. Often a debt consolidation loan comes with interest rates that are much lower than the interest rates associated with credit cards and other forms of debt. Additionally, a debt consolidation loan provides an extended repayment period, also leading to lower monthly payments.

With less accrued interest, the borrower should be able to pay off his or her debt in a shorter period of time. Additionally, the lower monthly payments can help the borrower avoid missed or late payments during months that are financially tight.

Debt-Relief Scams on the Rise in Kentucky

In your search for a debt consolidation loan, you should be aware of the many scam artists who target those impacted by today's rough economy.

As debt-ridden consumers try to find a way out of their financial troubles, many unscrupulous individuals have been targeting these unfortunate individuals, offering bogus debt-relief services.

Recently, the Kentucky Attorney General Jack Conway warned consumers that state authorities had been receiving an increased number of complaints from Kentucky residents who were victims of debt-relief scams. In addition to debt-relief scams, Kentucky residents also have reported being victimized by scam artists offer non-existent government grants or phony foreclosure services.

Another sign of the risk faced by Kentucky residents is the state's participation in a recent Federal Trade Commission (FTC) investigation focusing on scams targeting those facing financial hardships.

The operation - nicknamed Operation Short Change - was a coordinated effort between the FTC, Kentucky and 13 other states and focused on a variety of schemes, including fraudulent business ventures, false employment opportunities, fake debt reduction services, and government grants that were not real.

To assist in the fight against debt-relief scams, the Kentucky Attorney General asks that anyone who has been contacted by questionable companies offering services of debt relief, to contact the Consumer Protection Hotline at 888-432-9257.