To better understand the good and bad sides of a debt consolidation program, let’s take a closer look at the beneficial and disadvantageous features of this credit-busting option:
What’s Good about Debt Consolidation?
- Convenience in terms of your monthly payments. Since you will only be dealing with just one firm, it will be a lot easier for you to remember when your payment is due. At the same time, you can have more than enough time to prepare the funds you need to keep up with your financial obligations for the month. And this can in turn help boost your credit rating.
- Lower interest payments. If you once managed several lines of credit at the same time, for sure you had to make substantial payments on interest. But that’s no longer the case with a debt consolidation program. After all, you will only have to worry about a single rate of interest that will be imposed on your consolidation loan or on your balance transfer credit card. And in time, you may decide to use the savings you will generate from your interest charges to cover your succeeding credit payments.
- Suitable payment terms. You may decide to pay back your loan within the next two to three years or over the course of twenty to thirty years, depending on the amount of cash you requested from your creditor.
Drawbacks of Debt Consolidation and How to Deal with Them
- A huge risk of losing one of your valuable assets to repossession, especially if you pledged your home or your car against your debt consolidation loan. After all, your creditor has the authority or power to seize your prized possessions in case you fail to submit on-time and complete payments of your monthly dues.
So, to maintain ownership over your assets, you should resolve to keep up with your dues for the whole term of your loan. One way to succeed in this matter is to sign up for automatic payment arrangements with your bank. By simply authorizing the employees of the bank to withdraw funds from your savings or checking account and by letting them handle your financial obligations; for sure you can avoid missing out or skipping on your monthly payments. And this will surely help minimize, if not completely eliminate, your risk of losing your properties to repossession.
- There’s always the possibility of incurring new forms of debt, once you’ve settled your financial obligations, completely. This is especially true if you find it hard to control your spending habits, and if you think that you spend a relatively small amount on your loan repayments.
Hence we encourage consumers, like you, to take the necessary steps to curb their spending habits and to control their credit activities. For instance, you should resolve to apply for new lines of credit ONLY if it is absolutely necessary. And make sure that you will only use your credit cards to cover scheduled and important purchases. By doing so, you can avoid incurring unnecessary forms of debt, which could potentially push you down into new debt traps.