Debt consolidation feels like instant freedom.
When you can not easily manage your debt, bundling it all up
seems like a good idea. The most common way to do this is a debt
consolidation loan. This loan takes all of your debts and wraps
them into one loan.
Don't confuse it with bankruptcy, though. You still have to pay
this money back. You are simply refinancing the money that you
have borrowed.
Before you do this, you should know both sides of the story.
On The Good Side
Manage your money much easier with just 1 bill to pay each
month. Gone is the anxiety as each bill comes in, like a Chinese
water torture. Instead of incomprensible statements from credit
cards, gas cards, student loans, and car loans, it can seem a
blessing to get them down into one payment.
You'll get lower monthly payments. Since everything is tied into
one payment, the amount that you need to pay monthly can be
quite a bit lower.
Your interest rate is often lowered too. This is especially true
on high rate credit cards.
Probably the biggest benefit is that you will not have to deal
with creditors anymore.
On The Bad Side
It is crucial to realize that your debt is still your debt. It
hasn't lessened and it hasn't gone away. You still have to pay
it off.
It may take longer to pay off the debt. Because you have a lower
monthly payment, you are likely to pay longer to get the loan
down.
You will pay more in the long run. Finance charges and interest
rates add up and they stretch out the amount that you owe for a
longer period of time.
You will often need to secure your loan through property.
It may let you believe that you are more secure than you
actually are. You may think that your debt is under control.
And, you may think that you can keep spending now. That is not a
good idea at all.
The Balance
When it comes to deciding on debt consolidation, look at all of
the pros and cons.
You should shop around to find the lender who will offer you the
best consolidation loan. You should examine the interest rate,
the amount loaned, and whether it is a fixed or an adjustable
rate loan.
You should know the type of consolidation loan that you qualify
for and what the underlying factors are. Make sure to include
whether you have a good credit rating, if you own equity, and
whether you have a good amount of income coming in.
There are other forms of debt consolidation as well. One good
one is a credit counseling service. These organizations help by
working between you and the creditor. They can help to negotiate
a lower interest rate from some lenders, as well as teach you
how to more effectively manage your money.
Whichever path you choose, do it before the choices are taken
away from you.
About the author:
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Student Loan Consolidation to learn more.
Ron King is a full-time researcher, writer, and web developer,
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Copyright 2005 Ron King. This article may be reprinted if the
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