Most people understand that the advantages of
consolidation
of your
debt
are that you may get a reduced interest rate, you combine many monthly payments into one monthly payment, and with less of your payments going to interest, you may be able to get out of debt faster. But there are disadvantages to getting a debt consolidation loan.
First, if you have less than perfect credit, the lender may require you to pledge your house, car, or other asset as security for the loan. If you are unable to make your payments, you may lose your house or car, so you end up worse off than if you have never consolidated your debts in the first place.
In addition, if you attempt to reduce your monthly payments by getting a very long loan amortization period, you could actually end up being in debt longer, and paying more in interest, than if you had never considered a consolidation of your debt.
So with these advantages and disadvantages in mind,
what’s the secret for deciding whether or not to get a debt consolidation loan
?
The secret is you, and your unique situation. It doesn’t matter what the advantages and disadvantages of debt consolidation are for someone else; all that matters are your circumstances.
To find out how consolidation of debt will impact on you, make a list of what it costs you to service all of your debts each month now, and determine how long it will take you to repay them in full.
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