Debt Consolidation Pro’s & Con’s
For many people debt consolidation is a solution to help them with their debt problems. For some people they are successful, however for others it just adds to their already spiralling debt problems.
What is debt consolidation?
Debt consolidation is a way to combine all of your credit card balances and unsecured loans into one loan and one monthly payment. The general idea for debt consolidation is to take out one loan that will pay off all of your credit cards and unsecured loans leaving you with one bigger loan meaning that your debt will become more manageable. However what can happen is that once the credit cards have been cleared, if you keep hold of them the temptation is still there to continue using them.
Pro’s to Debt Consolidation
- One loan, one monthly payment
- Only one creditor to deal with
- Can help you manage your finances
- Can help paying your debt back become less stressful as you will no long need to deal with lots of different creditors with varying demands
Con’s to Debt Consolidation
- A consolidation loan could have a high interest rate meaning that it will take a long time to pay back.
- If you have a bad credit rating then you will find it hard to get a loan.
- If you do not cut up the credit cards then you can be tempted to use them again.
What to do next…
If you feel that debt consolidation is the right route for you then you need to make a list of all of your debts and find out how much you owe and how much you would need to get a loan for. Once you do that you will be able to shop around for the best loan. Once you have cleared all of your debts you need to make sure that you cut up all of your credit cards and store cards so that you don’t carry on spending. If you do then you will be defeating the object and will not be helping your situation, in fact you’ll be making your debt even worse!
For more information about Debt Consolidation then click here.
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Written by Lizzy on June 1st, 2011
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