Debt Consolidation ? Is it Right for you? - This That And The MBA .com

by Christopher on December 20, 2012

There are many different ways to approach dealing with debt problems. For each person, it will be down to their individual circumstances and the amount they owe which path they choose when working to clear their debts.

One option that you hear a lot about is debt consolidation. This is where a number of unsecured debts can be paid off at a stroke by taking out a new, larger loan that will cover all the smaller debts. This is a debt consolidation loan and is one way to manage debt.

Benefits of Debt Consolidation

Debt consolidation can add clarity to your debt situation. Instead of having numerous creditors to pay back different amounts each month, you will have the simplicity of making one monthly payment to the debt management company or other organisation that has financed your consolidation loan.
The debt consolidation loan will often have a lower rate of interest than you have been paying on credit or store cards, and the monthly payment is likely to be lower as the repayment period will be longer. It won?t work out to be cheaper overall, but you?ll feel less pressure, as long as the repayment schedule has been designed to work with your household budget.
The clarity and lack of administrative hassle will no doubt improve your stress levels ? and your sleep at night.

Disadvantages of Debt Consolidation

Some people who take out a debt consolidation loan think of it as wiping out their previous debt. This is dangerous territory, because, while it may free up your ability to use your credit cards again, in fact all a consolidation loan does is move debt all into one basket. It is still there for you to pay back, but because you have the freedom to use your cards once you have cleared any debts on them, you may fall into the trap of spending more than you can afford again.

So, is it right for me?

Using a debt consolidation loan will cost you more than just paying off existing debts, but it can give you the breathing space you need to get the debts paid off. As long as you have a strong self-discipline and can avoid the temptation of spending until the debt consolidation loan is paid off, it may be an appropriate solution for you. Always seek independent financial advice before entering into any agreement.

Have you considered debt consolidation?

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Source: http://thisthatandthemba.com/2012/12/debt-consolidation-is-it-right-for-you/?utm_source=rss&utm_medium=rss&utm_campaign=debt-consolidation-is-it-right-for-you

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