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Debt Consolidation

Depending on your credit score and the options available to you, consolidating your debt can mean saving money on your monthly payments and easing your overall financial burden. That being said, it's important to remember that there are two sides to every coin. While debt consolidation may seem like a saving grace, it could turn out to be your worst nightmare if you bite off more than you can chew.

If you're interested in consolidating your debt, our advice is that you become fully aware of both the advantages and disadvantages of debt consolidation before making your final decision. To help you decide which path is right for you, here are some debt consolidation tips to keep in mind:

Advantages of Debt Consolidation

  • By trading in your tangled web of credit card bills for one large bill, your payment deadlines will be much easier to keep track of.
  • Instead of having a wide range of interest rates on your debt, consolidating your debt will give you a single loan with a single interest rate. While secured loans typically have a lower interest rate than unsecured loans, in both cases you should be able to lower your interest burden from where it currently stands and lower you monthly payments, as well.
  • While this advantage isn't necessarily financial, it's also important to mention when it comes to our list of debt consolidation tips: by consolidating your debt, you can ease your emotional burden, as well. Saying goodbye to debt collectors means saying hello to your long-awaited peace and quiet.

Disadvantages of Debt Consolidation

  • Here's one of our most important debt consolidation tips: consolidating your debt doesn't make it go away. If you regard your consolidation as a "get out of jail free card," you're going to be in an even worse place than before.
  • If you don't have good credit, it may be difficult for you to get an unsecured loan. If you do, there is a possibility that the lower monthly payment may not be low enough to make a difference if you're struggling financially.
  • Unlike a debt settlement service, which can work behind the scenes, the consolidation company will appear on your credit report as a third party, which can have a negative impact on your credit report.
  • By consolidating with a secured loan, you have a lot at stake, and if you run into a hiccup in your payments down the line, you could lose a lot more than you would have without the consolidation. For secured loans to work, you have to offer up collateral, and if you can't pay, then your loan company has the right to take that property.
  • While you will have a lower monthly payment, if you stick to only paying the minimum, you could get stuck paying off your debt for a much longer period of time. With interest, this could become more burdensome.

Contact Us Today!

At Financial Solutions of America, we work hard to provide consumers with all of the resources they need, from debt consolidation tips to free consultations. Contact us today!

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