Many debtors are considering debt consolidation as the silver lining in the low financial state they are currently experiencing. It does seem like a quick fix in solving multiple debts, but a deeper understanding will aid those who are contemplating on consolidating their loans.
Convenience of Making a Single Monthly Payment.
With multiple debts, you are faced with several payment dates every month. This is such a great hassle, especially if you have other obligations to meet, like your work and family. Once your debts are consolidated, the lending company will be in charge of paying these multiple debts. Your sole obligation would be to meet your single monthly payment to your consolidating company.
Prevent Penalties Associated with Late Payments.
Since you are only dealing with a single payment, the chances of forgetting to meet your obligation on time are eliminated. Late payments always incur penalties and fees, which you cannot afford given the current state you are already in. Furthermore, your consolidating company can also try to negotiate a reduction of the accumulated fees on your current debts.
Lower Interest Rate.
Debt consolidation loans do not always equal to the total amount of your current debts. Consolidation companies often do negotiations with your creditors to come up with a lower interest rate, and this would be the basis of your new loan too.
Stop Harassing Calls from Collectors.
Once a consolidation company takes over the responsibility of paying off your multiple loans, these collectors are no longer allowed to contact you in any means. Usually, these phone calls and mails make the situation far worse than it seems because of the stress they cause. Any debtor would welcome this relief anytime.
Helps You Restructure Your Loan to a Plan that is Most Suitable to You.
Consolidation companies offer you advice regarding the best way for you to pay off your debt consolidation loans. Do your part by being honest in terms of your capabilities so that the best repayment plan can be structured to target your needs. Meet your obligations and learn from the debt counseling they offer so that you would be out of debt the soonest possible time.
You may put your assets on risk.
This is only true if you take a secured loan where collateral is required. Before deciding on collateral, make sure that you have the financial capabilities to meet your dues on time to avoid losing your assets.
Fake sense of financial freedom.
Since payment terms have become easier once your loans are consolidated, this somehow make debtors feel that they have eased out of a difficult financial situation, hence, go back to old habits of acquiring new loans.
Consolidation companies often set limits on the kind of debts they can pay off, and usually these are for unsecured loans only.
Debt consolidation is a wise move to slowly free yourself from debts, provided you see it as a solution that requires your serious obligation to pay. A strict sense of discipline is required to make it work so that you can reap its advantages.