What is the good and bad of debt consolidation?
Question:
Answer:
Before you even consider debt consilidation, you have to get your mind set on sticking to a budget, and quit buying on credit. After all, that's why you are in trouble now.
Over the past 2 years thousands of people bought into the idea that debt consolidation was a quick and easy fix to get out of debt. But they didn't control their credit spending, and ended up running their bills up again. Thousands of people filed for bankruptcy last year.
That said, consolidation can be very helpfull. It will lower your interest rate, and lower your total payments. But it will extend your debt for a few years.
Depending on your current financial position, that may be just the thing to help you out.
If you have a home, it would be even better to get a home equity loan to pay off your debts. But again, there are greater risks. If you don't make the payments, you can lose your home.
Hope this helps you out.
you can lose your home
You could end up owing more after consolidation, especially if you get cash out.
Dont get a loan to consolidate your debts. those companies just rip you off. really get to grips with all of your debts. work out exactly what you owe and then get in contact to work out a plan- paying just a little bit a month and not more than you can afford. those 0% credit cards are ok but check the rate that you will pay when it runs out. Look up martins money tips on google, if u live in the UK.
The good aspects of debt consolidation is that it minimizes your monthly payments to creditors, and can help you get your feet back on the ground in terms of taking control of your finances.
The worst aspect is that it puts a mark on your credit that can effect your ability to get credit in the future.
If you need to pay off your credit cards pronto, consider getting a home equity loan, or a loan from your bank. Debt consolidation should not be considered until all avenues have been explored, as it is detrimental to your credit score.
OK now listen, consolidation will give way to smaller payments, however, you won't get out of debt sooner. That's the bad. Lenders that will do consolidation will fail you in one way, and that is they won't teach you or encourage you on how to get out of that debt sooner.
More Related Questions & Answers...