Pros and cons of debt consolidation

Debt consolidation is an outstanding measure to help you to achieve a debt free life. The valued contribution that debt consolidation makes in your life has been perceived over time.

How can debt consolidation help you?

There are several advantages of debt consolidation

• Single monthly payment for all the debts:

The Debt consolidation companies combine all your multiple monthly debt payments such as your credit card bills, medical bills, unsecured debts and all other pending bills into one. You just need to make a single payment to the debt consolidation company and the company in turn would pay off your respective debts. In this way the debt consolidation companies reduces your extra bothering to keep a track of each debt payment and the interests that comes with it.

• Reduces or eliminates the rate of interest that is charged on the loan

The chief purpose of debt consolidation companies is to approve you long term low interest loan against the multiple loans you owe in the market.. They negotiate with your respective debtor to reduce your rate of interest and at times in the process of fixing the interest rate they land up in eliminating your loan interest .

• Framing a proper repayment plan:

The debt consolidation plan is not only an effectual way for you to repay your debt in a calculative manner but also facilitates you to plan your current economic transaction in an effective way.

• Avoid collection calls.

The Debt consolidation agency on their part would negotiate with your debtors and the collection agencies to stop harassing you as would deal with them further on your behalf.

Thus debt consolidation serves as an adequate means to plan your economy and lead you to a debt free life. However there are several limitations.

What are the disadvantages of debt consolidation?

Debt consolidation has been a great boon to manage our finance in a smart way .But it has several restraints.

• It persuades you to make more payment:
  

Signing up with debt consolidation ensures temporary relief in making reasonable
monthly payment. This leads you to handle your debts for a longer period of time. Finally you land up in making more payment for your debt than you could have made within the stipulated time.

• It might compel you keep your secured assets at stake:
  

Many a times you might required to guarantee your secured assets like your car or home against a debt consolidation loan which you should always avoid.

• These companies sanction you low interest loans at low risk.
  

This they essential do because they always have a chance to acquire the assets that you have pledged against the loan.

However despite all its drawbacks, debt consolidation serves as an adequate means to plan your finance and lead you to a debt free life.