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Debt Consolidation Pros and Cons

 

Debt consolidation can work wonders for some people and help to make their debts more manageable. However it is important to remember that although great for some, for others it may not be the best option.

When it comes to deciding if debt consolidation is for you it will depend on the debts that you have and if you have the self control to not continue to spend.

What is debt consolidation ?
Debt consolidation is a way of simplifying and helping you to pay off the debts that you have by taking out some form of loan. In this way you can pay off all your debts at once and be left with just one. By doing this it is hoped that you will have lower monthly repayments and therefore be in a better position to clear the debt.

Pros

  • Debt consolidation can give you a reduced interest rate and lower monthly repayments.

  • All debts are merged into one to try and simplify your finances and give you just one creditor. Just make sure you take out the loan or remortgage through a reputable lender.
  • This also means you should be able to avoid late payments.
  • Helps to lower stress levels.

Cons

  • If you decide to remortgage then you face the risk of losing your home if you fail to keep up the repayments. Therefore it is not always the risk free option that some people may think it is.
  • By consolidating your debts you may actually be increasing the total amount you repay if you only pay it back slowly. You will also be likely to have a set amount to repay rather then being able to pay just the minimum on a credit card.
  • If you do decide to take this route then you may find that your debts have already damaged your credit rating and you may not be able to obtain a loan. Also remember that the interest rates could be higher so you have to make sure you can afford the repayments.
  • You will need willpower to make this work since you will have effectively cleared your credit cards. It is important that you do not get yourself into further debts.


Are you eligible for a Debt Consolidation Remortgage ?

Try our simple debt solution calculator to find out.