Debt Consolidation Pros and Cons

Posted on by Emily in Debt

Debt Consolidation Pros and Cons – If you’re on the fence about pursuing debt consolidation, consider the following pros and cons. With careful thought and some research as to what your options realistically are, you can make the right decision for you about debt consolidation.

Debt Consolidation Pros and Cons

Simply put, debt consolidation is when you, “take out one loan to pay many others.” You’re basically putting all of your debt from different sources together and then making one monthly payment to one source rather than to 5 various ones. If done correctly, it can be very effective at paying off credit card debt. But debt consolidation has it’s critics as well. Let’s look at the Pros and Cons on the matter to help you decide what’s best.

Pros

- It can often come with a low rate for a set period, making it easier to pay off.

- All of your debt is in one place so you only have to make one “easy” payment.

- It is a far less overwhelming approach to approaching your debt.

- You can avoid bankruptcy.

- Debt collectors will stop hounding you.

Cons

- There may be a balance transfer fee.

- The initial rate quoted might not be what it is long term.

- If you’re late on just one payment, your interest rate can skyrocket.

- With debt consolidation loans, you may have to put up your house as collateral– a huge risk.

- Qualifying can be difficult.

- You might pay more in the long run.

As you can see, there are many things to consider before you decide to consolidate your debt. Another approach (other than getting a debt consolidation loan) is to attack your credit card debt by transferring the balances of all your cards to a single card. Many credit card companies will offer a low interest rate for the first year, which can help you make a serious dent in your debt if you plan it correctly. Afterwards the rates can go up to the normal amounts, but you’re still only paying one card off, which can feel infinitely less overwhelming.

Debt Consolidation Pros and Cons

Talk to a professional about whether or not you qualify for a debt consolidation loan. My mother had to do this some years ago and it basically saved her. But it’s your decision, and everybody functions differently– so listen to your gut. If it seems like it would be advantageous to your situation and you’re confident you can make the monthly payments on time, it could be a very good thing.

Debt Consolidation Pros and Cons

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