Getting into debt is very easy; however, getting out of debt seems almost impossible. You have credit card bills, personal loans, and other types of debt, and no end is in sight. You have so many bills to pay each month, and it is hard to keep up. When you have more debt that you can manage, a debt consolidation program could be right for you. Before you pursue this option, you need to know the pros and cons of debt consolidation programs.
Advantages of Debt Consolidation Programs
- You make a single payment instead of multiple ones.
- Your lower monthly payment amount will be lower.
- You could get a lower interest rate.
- None of your property is at risk.
- It might lower stress and anxiety.
- You can avoid further damage to your credit.
- It could be an opportunity to start fresh.
Disadvantages of Debt Consolidation Programs
Debt consolidation programs are not right for everyone. You might not get the results that you were hoping for. If you are not careful, you could dig yourself into a deeper hole. Some of the disadvantages of debt consolidation include:
- It could take longer to pay off your debt.
- Even with the lower interest rate, you could end up paying more in interest.
- It is for unsecured debt only, so your car payments or house payment is not eligible.
- Do not add more debt. The goal is to eliminate your debt.
- It could hurt your credit.
- You might need decent credit to qualify for a debt consolidation program.
When you are interested in a debt consolidation program, you will first speak with a counselor to review your debt. They will be able to tell you if the can help you. Many debt consolidation programs require a small set up fee. You will make your monthly payments to the company, and then they will pay the lender. It is a good idea to close all your accounts, so you cannot keep charging purchases. The company will negotiate with your creditors and attempt to lower the interest rate and additional fees. It is important to choose the company that is reputable and reliable. Read consumer reviews, search the website, and make sure the company has a good track record. You can then consolidate your debt and get a fresh start with your finances.