Pros and Cons Of Consolidating Debt
Is debt consolidation good?
There significant pros and cons of consolidating debt despite many debtors thinking of it as a “get out of jail free card”.
However, when it comes to the question, “is debt consolidation good” there are definite real advantages to debt consolidation.
Whilst there are pros to consolidating your debt, it’s wise to carefully consider the cons of debt consolidation before embarking on this strategy in an attempt to becoming debt free.
5 Advantages of a Debt Consolidation Plan
1. All Of Your Monthly Debt Payments Are Rolled Into 1 Monthly Payment.
This means it’s easier to manage your debt as you only have to worry about one payment to cover all of your smaller debts.
2. Less Interest resulting In Saving Money
The interest rate applied to your debts is much lower for your combined debt as it would be for your smaller individual debts which would attract a higher interest rate
3. Debt Relief
You’ll experience immediate relief from having your individual creditors hounding you for payment as you’ll be able to service all your monthly bills in full each month
4. Flexible Payment Plan
You can secure a flexible payment plan which means that you can opt to extend payments to five, ten, even thirty years.
5. You Will Be Able To Pay Off Your Debt Faster
As your interest rate should be lower with consolidation, it follows that your debt will be paid off quicker should you continue paying the same monthly amount & as a result you should be able to pay off your debt significantly quicker than it would’ve taken on a minimum payment schedule.
Want more info on getting quick debt relief from your financial burden
Go here to start your road to recovery »
Don’t forget that by consolidating your debt you should not only experience quick financial relief, but you will also benefit with a substantial saving by servicing your debt in this manner.
7 Cons Of Debt Consolidation
Whilst a debt consolidation loan may enable you to consolidate your debt into one monthly payment, it could also lull you into a false sense of security & encourage your reckless spending habits putting you further into debt.
- Debt consolidation requires extreme discipline as the temptation of having additional credit available may be too much to resist resulting in reckless spending & purchasing.
- If your debt consolidation is not handled by a reputable company, a small lender is in danger of going out of business which would cause your loan to get handed over to an unknown 3rd party who may not have your best interests at heart.
- Getting a debt consolidation loan usually requires additional credit checks and a thorough scrutiny of your situation making it difficult to qualify
- Once you’ve qualified for debt consolidation you should get a favorable interest rate but the loan could be extended over an unreasonably long period of time which could result in you paying off more in interest than you would have before consolidation.
- Should you put up any collateral, such as your house, you risk losing it should you default on the loan.
- Another risk is that should you eventually get through the process & manage to clear your debt, your old reckless spending habits could resurface plunging you into a new cycle of debt.
Making the Right Decision
In conclusion, whilst debt consolidation does offer benefits to debtors to help them get out of debt, it is recommended that you consult with a reputable debt relief company to ensure that you’re acting in your best financial interests.