The right conditions for choosing debt consolidation
If you are reading this then you probably have a lot of debt payments to pay every month, probably even at different times of the month. This is a horrible situation for several reasons: it can seem unnecessarily expensive; and it can be confusing juggling all the different payments. The idea behind debt consolidation is quite simple; you take out one more giant load big enough to pay off all your existing debt, thus switching your many payments into just one payment.
On the surface this sounds like a great idea. But as with many financial products there are pros and cons that need careful consideration before any decision is made, for though these things can look attractive, they may be worse for you over a longer period. The initial benefit of it is, as mentioned at the beginning of this article, just that one single payment is much easier to manage and keep track of than multiple payments are.
Also, if you can get hold of a consolidation package that has less APR than your current debt payments, then you can reduce the amount of interest you pay over all in paying it all back. And if you can arrange the payments to be over a longer time frame then you can substantially decrease the amount you pay out each time; though this may increase the total amount in the long run.
Depending on your situation, however, there can be some pretty serious drawbacks. As said above, decreasing your monthly payments might not be the best option in the long run, as this will probably increase the total amount you pay over all. And if your debt management is in a really bad way and you cannot afford them, you may benefit from a debt management plan rather than adding more debt to the equation.
If you have an income that is unpredictable and changes each month, then it is not a watertight certainty that you will be able to pay the right amount off each month, and so it is a bad idea to take out another loan. If you have trouble with debt, more debt can be the worst option for you.
Find out more about debt consolidation.
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Source: http://financehelpnews.com/business-finance/the-right-conditions-for-choosing-debt-consolidation
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