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The Pros & Cons of Debt Consolidation

The Pros & Cons of Debt Consolidation

Many people have mixed feelings about debt consolidation and what it can do for them. Like many other things in life, this can be the ‘best’ step for every person who’s in debt.  It is different for each person and for each individual’s debt situation.

It’s best to weigh up all of your options before you go straight into considering debt consolidation. While there may be advantages to choosing this method, it’s best to get all of the facts first before giving it the green light.

To find out if debt consolidation is really the best step for you, the pros and the cons must be weighed up. Some of the main pros and cons that could be considered are listed below.

Debt Consolidation Pros:

  • Lower interest or fixed rate
    This means you’re paying less on debt every month. Shop around for the lowest interest rates when you’re thinking about which company to consider. This way, you can plan accordingly with the options you have and end up coming out on top.
  • One creditor, one monthly payment
    Instead of several payments, you’ve concentrated all of your debts into one big payment, which may make it easier to manage. Pooling your repayments altogether can cause less of a headache later, with less stress down the line as well.
  • Reduction of the overall amount paid each month
    Less to pay means the more you can save for yourself, or for future consolidation repayments, depending on your situation.

Debt Consolidation Cons:

  • One creditor, one monthly payment
    Although it may be easier to manage, it takes away your ability to negotiate with your different creditors if further financial troubles arise.
  • Difficulties in gaining loans
    Or discharging your debts into bankruptcy. With something like this kind of loan found in your history it can be easy to be turned down by companies
  • Longer term to pay
    Meaning you’re in debt for much longer than originally anticipated.
  • Pay more overall due to the increase of payment time
  • More debt in the long run
    If the person going to consolidate debts has a bad spending habit, it could lead them into more debt as they free up their credit cards.

It is vital to do the math and not get pushed or rush into anything. You have to be sure of what you’re doing and that it is the best option for you. There are questionable companies out there who do not have your best interests at heart. Be sure to base your decision on facts and figures, not how friendly and helpful their staff are!  Removing emotion from your decision making will better protect you from being locked into a situation you’ll regret.  Taking the time to weigh up all your options at the beginning can potentially save you thousands in interest over the term of the agreement.

If you’re struggling to get by with over $8,000 of unsecured debt, contact Debt Mediators today for a no obligation consultation to discuss your options.  Our Personal Insolvency Specialists have alternative debt solutions that are loan and interest free.

 

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