Many times, people are so relieved to find a solution to their debt problems that they focus on the positive aspects while ignoring or downplaying some of the potentially negative sides. To develop a comprehensive debt strategy, you will have to take a hard look at the advantages, but especially the disadvantages to see what makes sense for you. This is true when it comes to debt consolidation because this solution will have implications for your financial future and how you can manage your debt going forward. While debt consolidation may be a great debt relief option for some, there are disadvantages that need to be considered, including the following:
Debt is Not Paid Off
If you are having financial difficulties and can’t keep up with multiple payments, at least you can focus your efforts towards a single monthly payment with debt consolidation. Disadvantages include the fact that the full amount of your outstanding debt is still owed. The good news is, your interest rates will be lower, allowing you to put more towards the premium each month and to actually make headway with your payments.
Longer Repayment Period
When you consolidate your debt, remember that the full amount does not really change, it just gets stretched into smaller monthly payments. This longer repayment period is something to consider when developing a debt consolidation strategy, especially if you really planned on being debt free by a specific date.
There are hefty penalties when you miss payments for a debt consolidation loan. These can include very high late fees and penalties in addition to potentially losing any collateral (your home, car, or other asset) that you used to secure the loan. The penalty costs will add up, potentially causing you to pay more for your debt than you originally owed before entering into a debt consolidation program or loan agreement.
Gaining Control of Your Debt
While there are some disadvantages to debt consolidation, there are also many positive outcomes. Of course, a debt relief expert can help clarify exactly which solution will benefit you the most. You don’t have to live with debt forever. You don’t have to struggle to make ends meet every month. Take advantage of the tools available to help you gain control of your debt and start on the path to becoming debt free.
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