How Debt Consolidation Can Make your Life Much Easier
What is Debt Consolidation?
Simply put, debt consolation is a simpler term for taking out a new loan to pay off all your debts. This new debt consolidation loan will usually come with a lower interest rate to make it more manageable to pay back.
Although debt consolidation can help you to save a little hard-earned money, it comes with its caveats, too.
Debt Consolidation Pitfalls to Avoid
Some people never learn. If you’re not trying to get to the source of the problem, don’t have a plan, aren’t ready to do research before you choose a debt consolidation vendor, choose the wrong debts to consolidate, use your credit cards too soon after your debt consolidation, or worse, choose the wrong debt pro –that’s on you. Remember that.
No one is going to assume the risk they need to in order to help without being paid, and sometimes it’s hard to spot a crook.
Risks of Debt Consolidation
Debt consolidation can make life easier for most people, however there will be those that should view debt consolidation as a risky proposition and more extreme measures may be required, such as a Part 9 debt agreement or bankruptcy.
- Don’t approach debt consolation with rose coloured glasses; if you aren’t able to make your payments on a debt consolation loan, there’s no point in exploring this route to debt management.
- A company whose primary focus is debt consolidation may charge less than your bank, or they might charge more –be sure to shop around a little bit
- Remember that debt consolidation adds new costs onto your debt problem
For most people the benefits of debt consolidation far outweigh the negative aspects. If you’re able to make your payments and you don’t mind adding a bit more cost onto your debt to mitigate bankruptcy, then by all means explore debt consolidation.
The Benefits of Consolidating debts
Now that we’ve got the possible consequences out of the way for a fair and balanced perspective, let’s take a look at the benefits of consolidating debts.
- Right off the top, a lower interest rate loan is usually on the menu for people who consider debt consolidation
- Managing only one loan and one minimum payment may be just the right amount of breathing room one needs to clear their name.
- Payment sizes are often smaller because debt consolidation loans are generally spread out over a longer period than your typical loan. This also frees up a little extra for other expenses.
Debt Consolidation Tips
If debt consolidation sounds like a solution to what ails you, then consider these debt consolidation tips:
- Check your credit; don’t take your bad credit laying down and review your credit report for any errors.
- Don’t go back to credit until you’re way down the line, and even then, minimise it as much as possible. Do you really need to?
- Stick to whatever you agree to. You chose this route to debt management to avoid bankruptcy –stick to it.
- Some debts have lower interest rates than others –and some might even have a lower interest rate than your debt consolidation loan! Food for thought; don’t consolidate loans with lower interest rates than your consolidation loan.
Debt consolidation is definitely the right solution for most people who don’t want to turn to bankruptcy, or related acts of bankruptcy such as a Part 9 debt agreement.
What do you think? Let us know in the comments!