The issue of whether Debt consolidation loans affect your credit has been mired in controversy in recent times. While many critics of these loans point to the fact they are the major causes of America’s slide into indebtedness this is in fact not true. The subject needs to be looked at more soberly and not just from the hyped media debates currently taking place. The correct answer to the above question would be that debt consolidation loans have both negative and positive effects on a creditor.Although a short term loan will not reflect an immediate change in the quantity of debt or the ratio of debt to income, it will in the long run decrease due in part to the efforts of a short term loan company. Additionally, shorter loans are what enable you to pay the huge amount of debt that you initially had and so in the process will decrease the amount of credit owed to you.Some components of shorter loans could actually affect your credit negatively. One situation is whereby the loans that are negotiated by the debt consolidation experts are reflected as ‘defaulted’ or ‘settled’ on your credit report. Though this may act as a blow to you, the effects are only for a limited period; normally not beyond six years. Put simply the loans that you get in the short term will definitely have a higher interest rate but they will be beneficial in the long run in helping you to reduce your debt.The downside of a payday loan is that if you fail in repayment of a single month the loan could reach a staggering amount. The main reason for this is that because your debt is all lumped up together, you will be way off your repayment schedule. This is however a rarity rather than the norm.Finally, payday loans will for the most affect your credit positively. They will help you reduce your debt amounts considerably. Though in recent times, these loans have been cited as being the chief causes of the global financial crises this is not true.