What are the advantages and disadvantages of debt consolidation?
Advantages of Debt Consolidation Services The primary advantage of debt consolidation is that by combining all your debts into a single account, it becomes easier for you to remember your due dates and track your payments. There is no need to juggle your payments between different creditors. Debt consolidation also means paying only a single interest at a much lower cost.
Through debt consolidation, it is possible to slash off a significant amount of fees from your total debts. Instead of continuously incurring the additional interest each month, you can pay off all your creditors at once and stop your debts from accumulating.
Most creditors are even willing to make adjustments to make repayment easier for their clients, especially if there is a possibility that the client may file for bankruptcy.
Disadvantages of Debt Consolidation Services Nevertheless, signing up with the wrong debt consolidation company can only make matters worse for someone in debt. Take note that not all credit counseling agencies or debt consolidation companies have your best interests at heart.
There are agencies offering counseling services that are actually designed to take advantage of your financial situation. Therefore, if you do decide to sign up for counseling or a debt consolidation program, it is crucial to do extensive research first before making a choice.
Another risk about consolidation is the tendency to incur new debts right in the middle of repayment. Remember that consolidating your debts does not exempt you from your obligation to pay. You still need to keep up with your monthly consolidation payment to your lender.
Unfortunately, some people found themselves stuck in new debts while still in the middle of their consolidation loan repayments. Instead of being free, these people have only added a heavier burden on their shoulders.
How to Make Debt Consolidation Work Debt consolidation can help you get out of debt more easily but only if you know how to make it. After consolidating your debts, you should avoid incurring new debts from your creditors so that you can focus on paying off your loan.
Pay attention to your spending and lifestyle. What circumstances led you to bad credit? Are you in the habit of spending more than what you can afford? Do you tend to neglect or forget your payment schedules? The need to take out a consolidation loan should be a wake-up call to remind you about your responsibilities.
Even before you sign up for debt consolidation, create a monthly budget plan to make sure that your income would be properly allocated. Bear in mind that your number one priority should be completing your consolidation loan payments at the soonest possible time.
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