Anyone who is suffering from a large number of debt payments every month has probably thought about getting debt consolidation loans. Not only would they simplify your life but they would probably leave you with more money in your pocket at the end of the month as well.
Before jumping into getting one of those loans, it is best to know what you are getting yourself into. While there are some definite benefits to consolidating your debt, there are also some negatives that you had better understand before signing any contracts and getting yourself into something you may not want after all.
The thing that people love most about consolidating all their debt is the money they save each month. While they still owe the same amount on their principal loan because it is a single loan the amount they pay is almost always less than all of the little loans added up to each month. This means that they have more money to spend at the end of every month.
With more money to spend you could do the things you wanted, and you wouldn’t have to worry about all of those bills nearly as much because you have cash to spare. While that sounds great it pays to dig a little deeper into that offer and why you are saving money each month.
When you get your debt consolidated you end up paying for much longer before the loan is completely paid off. You pay on the debt longer for a number of different reasons, but in reality you aren’t actually paying the same amount of money for that consolidated loan as you would have been paying for all of those smaller loans.
Instead you are paying a higher interest rate and you are paying over a longer period of time. Since the longer you take to pay of an interest loan the more you pay, you will be paying much more money in the long run. Since you are paying more money most financial advisers recommend that you avoid consolidating loans for as long as you can, otherwise you are just throwing money out the window.
On the other hand a single payment means that you have less bills to keep track of. With that one single payment you are much more apt to make it on time than you would have been for all of the little payments. In this way consolidation will simplify your life quite a bit and you won’t have to worry about missing any of those bills each month.
Relying on debt consolidation is a good way to prolong your debt even though it may make things easier in the present. If you must get your debt consolidated then it isn’t a horrible option, just avoid it if you can afford to pay off your debt without the help of consolidators.