If you have a number of debts that you are struggling to manage then debt consolidation may well be an excellent way of getting yourself out of trouble. It will, however, not be the best option for everyone and there are certainly some significant advantages and disadvantages to consolidating your debts. Let's consider what these are right now.
One of the major benefits refers to the fact that you will find it a lot easier to manage your debts. If you have a number of payments that you need to make each month to a number of credit cards, it can be difficult to maintain control over your financial spendings. If you get a debt consolidation package, however, you will only have one creditor and, therefore, one payment.
Many people find that they are able to save a lot of money as well. If you have several credit cards, for example, and you are only making the minimum payment then the chances are fairly high that you will only be covering interest each month. This means that you will not be making any real progress into the balance off the debts and, therefore, will waste a lot of money on interest payments. If you consolidate your debts, however, you would always be making progress and will, over time, save money.
In addition to this, you will have a clear idea as to how long it is going to take to cover all of your debts. You will enter into a payment plan whereby you will be paying off a certain amount of money every single month for several years.
There are, however, disadvantages to taking this path. Some people find that they actually spend more money on a consolidation loan than they would if they simply paid more attention to their credit cards and other debts. Because you would be paying the money back over several years, the amount of interest you pay will accumulate and can become significant. If you were more responsible, however, and you actually made more than efforts to pay off your debts one by one, you could well save money on interest.
If you are not financially responsible then you may also find yourself getting into even more debt by choosing one of these loans. The reason is because they would free up your credit, allowing you to dig yourself into a deep financial hole. If you are not financially responsible this can be extremely dangerous.
In most cases, however, the advantages certainly outweigh the disadvantages. As long as you are sensible, you should be able to save money reduce your payments, and manage your finances a lot more responsibly.
One of the major benefits refers to the fact that you will find it a lot easier to manage your debts. If you have a number of payments that you need to make each month to a number of credit cards, it can be difficult to maintain control over your financial spendings. If you get a debt consolidation package, however, you will only have one creditor and, therefore, one payment.
Many people find that they are able to save a lot of money as well. If you have several credit cards, for example, and you are only making the minimum payment then the chances are fairly high that you will only be covering interest each month. This means that you will not be making any real progress into the balance off the debts and, therefore, will waste a lot of money on interest payments. If you consolidate your debts, however, you would always be making progress and will, over time, save money.
In addition to this, you will have a clear idea as to how long it is going to take to cover all of your debts. You will enter into a payment plan whereby you will be paying off a certain amount of money every single month for several years.
There are, however, disadvantages to taking this path. Some people find that they actually spend more money on a consolidation loan than they would if they simply paid more attention to their credit cards and other debts. Because you would be paying the money back over several years, the amount of interest you pay will accumulate and can become significant. If you were more responsible, however, and you actually made more than efforts to pay off your debts one by one, you could well save money on interest.
If you are not financially responsible then you may also find yourself getting into even more debt by choosing one of these loans. The reason is because they would free up your credit, allowing you to dig yourself into a deep financial hole. If you are not financially responsible this can be extremely dangerous.
In most cases, however, the advantages certainly outweigh the disadvantages. As long as you are sensible, you should be able to save money reduce your payments, and manage your finances a lot more responsibly.
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Get exclusive inside information on the pros and cons of debt consolidation now in our guide to everything you need to know about Debt Consolidation in South Africa.
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