You have probably heard of debt consolidation, but it can be tricky to get your head around it with differing views and misconceptions. So how do you know if debt consolidation is the right option for you?
Do you have several high interest loans? Managing multiple debts can be time consuming, expensive and downright exhausting. On top of that you may have multiple loan companies or collection agencies on your back. The great thing about debt consolidation loans is that you could make all of this disappear by rolling all your debts in one easy to manage loan.
Rolling your debt into one could be more affordable for those who are juggling multiple debts. The longevity of the loan means you pay smaller repayments and ideally, lower interest rates.
It becomes easier to manage as there is only one payment going out to cover all debts. You can set up one automatic payment to avoid late or missed payment fees- simple, stress-free debt! Budgeting is also made easier with small, controlled payments. You may find you are able to put a little extra into your savings each month.
It seems straight forward, so why wouldn’t you consolidate your debt?
The simplicity of one payment alone is not a sufficient reason to consolidate debt. If you have control of your current loan/loans then consolidating your debt may not be the best option for you. This will result in holding on to your existing debt for a longer period of time and you could end up paying more in interest over the years. You can save more on interest by making larger payments on each of your debts; however, not everyone can afford this option.
Consolidating your debt is not a free pass for taking out new loans. It is a short term fix to aid debt repayments. You may feel more in control but this is not a sufficient reason to take on new debt. Always pay off your debt consolidation loan before snowballing more debt into it.
So before you take out a debt consolidation loan, consider your current financial status. If you faring well with your existing debt, keep going! Become debt free as soon as you can. However, if you are struggling to keep up with multiple payments, avoid spending all your money on interest and late fees. Debt consolidation can be an affordable, stress free option when you are in need.
Disclaimer: The above information is general in nature and not intended to be financial advice. You should consider seeking professional advice before following any suggestions in this blog/website.