How many different "monthly payments" do you make each month? With credit cards, car loans, and mortgages,
the average American household has 7 credit accounts. That translates to large amounts of monthly interest charges and minimum payments.
Increasingly, Americans struggle with the number of accounts they have AND with making those monthly payments. People are looking for ways to lighten that monthly load. One way to "lighten" the load is debt consolidation.
Debt consolidation is the process of grouping a number of smaller loans into a single larger loan. Ideally, this process simplifies the record keeping and payment schedules. At the same time, it reduces the interest rate and monthly payment amount for the total amount of debt owed.
Sounds like a great deal, right? Maybe.
Debt consolidation CAN be a good way to get out of debt, but the process itself doesn't guarantee beneficial results. As with any financial tool, there are pros and cons to be considered before you sign a debt consolidation loan and/or debt consolidation agreement.
THINGS TO CONSIDER:
1. CONSOLIDATED DEBT IS STILL DEBT - The process of consolidation MAY save you time and interest charges but it does not, in any way, reduce the amount of debt that you owe.
2. CONSOLIDATING DEBT ONLY HELPS IF YOU STOP ACCUMULATING DEBT - This is true of any plan to get rid of debt. Continuing to charge on your credit accounts will put you in a financial situation that is worse than the one you started with.
3. DEBT CONSOLIDATION IS NOT AN SIMPLE SOLUTION - In the appropriate circumstances, debt consolidation CAN be a useful tool for eliminating debt. The reality is that getting out of debt is not easy, no matter what plan you choose. If it was, more people would do it!
4. YOU CAN CONSOLIDATE YOUR DEBTS ALL BY YOURSELF - You do NOT need a
debt consolidation company to do it for you. Other than charge you fees, a debt consolidation company does not do anything for you that you cannot do for yourself.
5. DEBT CONSOLIDATION CAN BE DANGEROUS - If you convert
unsecured debt into
secured debt, you place your assets at risk. You need to understand all the risks associated before you commit to debt consolidation.
When considering debt consolidation, the most important thing to remember is to take your time and make sure you understand EVERYTHING about the process and the risks. Doing that will help you make the best decision for you and your money!
