Debt consolidation has been the light at the end of the tunnel for many people. They find themselves swamped and way in over their heads in debt. Before you make a decision about whether or not consolidation is the best option for your situation, you should weigh the pros and cons of taking this action.
If you take out one of these loans, you’ll be eliminating your debt by streamlining it into one single monthly payment. Regardless of the pros and cons, taking action is always better than inaction. Any move toward financial freedom has to be good, even if painful. But these loans tend to take the pain of debt away, and relieve people of the stress they feel under several payments and dealing with several creditors at high rates of interest.
PROS – Here are some of the ‘pros’ for taking out this loan. The way it works is that you consolidate all your lesser debts into one loan that covers them all. Then by way of a monthly payment plan, you make one payment each month to only one company. You no longer deal with the debt collectors, or juggle due dates to make payments.
You’ll feel like a huge burden has been lifted from your shoulders. This loan will be structured to fit right into your budget so making your payments won’t be a monthly burden too hard to bear. As long as you make the payments on time each month, you’re going to see some positive things happen with your credit report. In time you can revive your credit back into good standing and have healthy credit scores.
CONS – Because debt consolidation involves closing out all of your credit accounts, initially there will be a jolt to your credit score. It’s basically due to the credit reporting agency seeing that you have less active lines of active credit and therefore lowering your score accordingly. And while most of these loans result in lower interest rates, it isn’t that way in all cases. You may, depending on your situation, end up with a higher rate of interest. But again, this is not the usual case. The companies will charge an initial fee and then their monthly service fee. You can negotiate these fees but they are still an added expense that you should consider before enrolling.
So there are a few pros and cons to think about if you’re considering getting a debt consolidation loan. Hopefully they will be helpful in your decision, and you’ll make the right one for you and your family.