Consolidating debt pros and cons
Here are some things you should consider before applying. If you’re struggling with credit card debt or have difficulty juggling payments on multiple loans – each with specific interest rates, conditions and balances – you may want to consider consolidating your debt.
Debt consolidation basically means collapsing all your existing debts into one new debt.
Debt consolidation can cause the illusion that debt is being paid off.
The problem with these advertising spots is that they only talk about the benefits. When you consolidate your debt, you are taking multiple payments and putting them into one. Along with this, you no longer have to decide who should get paid first and how much you should send each creditor.2. How much money are you paying out in interest every month?
Unfortunately, this has tricked many people into consolidation when it was not the best decision for them. If you have a lot of debt, spread across several loans and/or credit cards, you may be paying hundreds or maybe even thousands in finance charges.
Such loans also tend to offer a longer repayment period.
So if you want to look at the pluses and minuses of debt consolidation for your personal situation, you might want to start by considering your monthly cash flow — and ask yourself the following questions: Pro #1 — When you opt for debt consolidation, you have only one creditor to pay, and that company will call your creditors and negotiate on your behalf.