Pros and Cons about Debt
Consolidation - Loans
Debt consolidation loans are presented
as a means of getting out of debt and repairing your credit.
For some, that is how it works. For others, it isn't the great
solution it is reported to be. If you have tried to manage your
debt on your own and have failed, you might be considering
filing for bankruptcy. Before you file, consider debt
consolidation or a debt consolidation loan. here is a look at
some of the pros and cons involved.
Pros
* One payment instead of many - No more
pulling your hair out because you aren't sure when this bill is
due and whether that one is a middle month or end of month, and
did you pay the Visa or did you pay on the American Express?
With one bill to pay every month, it is much easier to keep
track of payments.
* Lower interest rate - if you get a
secured loan. Your monthly payments will be less.
Cons
* It takes longer to pay off your debt
in this manner, unless you pay over and above the amount of the
bill. Not only this, but in the end you will have paid out more
than you would have without consolidating.
* With a secured loan, you are in
danger of losing your home, whereas; with credit card debt, you
lose points on your credit report.
* If you have an unsecured loan, your
interest rate may be higher. This doesn't help your
finances.
* It can create a false sense of
security. Many people find that the temptation to spend more
because they do have a lower monthly payment is too much for
them. They either accrue more debt or are suddenly unable to
make their monthly payment.
A good calculator exists online at MSN
Money - Personal Finance. Enter your information such as amount
owed, interest rate, and the monthly payment you are able to
afford. The calculator will tell you if a consolidation loan is
in your best interest or not.
Unlike debt consolidation loans, the
services you may get from a non-profit company are less
self-serving. If you don't have any assets but have a lot of
bills, a non-profit debt consolidation company might be what
you need.
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