As explained in my earlier post, debt consolidation as the name suggests, is a process of combining all your loans and making it a single loan so that you pay a single company. This company can be same as your earlier lending company or a totally different company. Single payment is made over a longer period of time. Debt consolidation not only makes your total amount to be paid less than all your loans added together, but also makes your payment easy and manageable.
Debt Consolidation has it’s own advantages and disadvantages, Advantages includes:
- Single payment, you need to pay a single lender making your payment processes easy.
- The interest rates are lower as compared to individual loans if you have secured loans.
- Due to low interest rates, your monthly payments are reduced, making you financially stronger with the money in hand.
- You can break taxes with the interest that is paid towards your mortgage.
- Single creditor makes your life easier, as you don’t get unexpected reminders and calls from various lending agencies.
With number of advantages, debt consolidation if not used properly may have certain harmful effects as well.
- It is observed that many of them who have undergone debt consolidation have lost the remaining they have, since debt consolidation loans are secured loans against your property etc.
- If you have bad spending habit, try and avoid debt consolidation since more money in your hand will make you spend more on unnecessary spending.
And finally as I always say, make sure that the company you are going to use for debt consolidation is authorised, clear with the process without any hidden clauses.
Tags: Debt Consolidation, debt repayment, Finance, loan consolidation
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