The Many Benefits of Debt Consolidation

Debt consolidation has become an exceedingly popular tool and there are two very good reasons for this: Thanks to debt consolidation, you’ll on the one hand be able to reduce your monthly payments for your loans and considerably simplify your finances on the other. If all goes well, this will allow you to steer clear of bankruptcy or similarly drastic measures. At the same time, debt consolidation has come under a lot of fire in the media of lately, with some commentators criticising it for supposedly increasing your overall debt or for charging you a fee for services you could just as well perform yourself. So is debt consolidation really a sensible way to tackle your debt problems? The answer is that it most likely is – if you decide to work with a respectable and trustworthy debt management company.

So how does debt consolidation work? It’s simple, really. The debt management company assisting you with consolidating your debt usually renegotiates all your different loans and merges them into a single monthly instalment. There are two advantages to this: Rather than paying all of your different creditors, you’re paying your debt consolidation company – a company working for you and with your interests in mind. This will significantly reduce the stress associated with juggling the complexities of multiple loans and communicating with dissatisfied or even outright threatening lenders. There are even more tangible benefits, however. Already a small reduction in loan payments can prove to be decisive in avoiding bankruptcy, but in many cases, the monthly reduction resulting from debt consolidation is actually quite substantial.

So with all this in mind, why has debt consolidation been attacked so heavily by some in the media?  Mainly, its critics have accused debt consolidation of fooling debtors into schemes which will have them paying more, rather than less in the long run. After all, if you’re paying smaller amounts each month, the duration of your loan will increase, which means you will end up paying interest over a longer period of time. The accumulated interest could then add up to a higher sum than before. Although a professional debt management company will contrarily be able to drive down your debts in many cases, the argument is not entirely beside the point. And yet, no one is seriously claiming that debt consolidation represents a panacea. Rather, it is a helpful method for those capable of paying back part – but not all – of their debt. And if it helps you avoid insolvency by paying a slightly higher loan that hardly seems too high a price to pay.

In the end, everything depends on the company you’re working with – if they are up to the job, debt consolidation can help you get back on track and out of the red again.

This article was sponsored by Debt Advisory Line.

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9 Responses

  1. I used debt consolidation a few years ago and it worked out well for the most part. I was really in a bad place and I needed a feasible option to recover and this is what worked. With the reduced interest rates I was able to pay off all of my debt within one year. It felt so good to have it gone. I wouldn’t have been able to do this if I hadn’t taken advantage of consolidation.

  2. Aaron Hung says:

    very informative post, funny I posted the same subject today too 😀

  3. Buck, I’m not a fan of debt consolidation. It doesn’t tackle the issue of why you got into debt in the first place. The debt consolidation may lower your money payment but it also may severely impact your credit.

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