The concept of debt consolidation is simple; you get a lot of money to pay off some or all of your bills, then you make monthly payments to one creditor at a reduced rate until those bills are paid off.
This sounds like a good idea, because having too much debt is scary, and with all the different interest rates sometimes it feels like you can’t get close to paying off all of your bills. At the same time, even debt consolidation isn’t for everyone.
If you’ve ever wondered if debt consolidation is for you, the benefits and negatives of debt consolidation below can help you with your assessment.
Here are some of the benefits of debt consolidation:
*you learn just how much debt you’re in and what needs to be done to reduce your debt
*often, you have one company that you make your payments to
*you have the opportunity to pay off all of your debt quicker and realize financial freedom
*your interest rate will probably be lower than most of your other debt
*your mind can be eased because you’ll have more money to spend in other ways
Here are some negatives of debt consolidation:
*you have to make sure you keep to your payment schedule; missing a payment will hinder any progress
*you have to make sure you don’t create new debt while you’re paying down the consolidated loan
*sometimes a condition of obtaining a consolidation loan is that you have to give up all credit cards
*not all outstanding debt is allowed to be considered
*you might have to be dependent upon someone else paying your bills on time
*if you still can’t pay all your other bills, debt consolidation may not be for you