Understanding Debt: Pros and Cons of Debt Consolidation

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Are you doing your best to understand debt? Read this article to learn about the pros and cons of debt consolidation to learn what’s necessary.

Are you looking to get rid of your debt once in for all?

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If so, you’re certainly not alone. In fact, credit card debt in America has soared to $930 billion. Additionally, the average American household has $9,000 of credit card debt.

Luckily, there are many strategies you can implement to start tackling your debt. One of them is debt consolidation.

But, before you start consolidating your debt, you need to understand the pros and cons of this strategy. Check out this guide to learn about the pros and cons of debt consolidation.

What is Debt Consolidation? 
Before we dive into the pros and cons of debt consolidation, let’s first talk about what debt consolidation is.

Debt consolidation is the process of gathering all of your debts into one account so you’re only dealing with one monthly payment. By doing this, you’ll reduce the number of payments you have to make, and hopefully, reduce your interest rates.

It’s important to remember that debt consolidation typically doesn’t include secured loans, such as a car loan. However, it does include unsecured loans, such as personal bank loans, credit card loans, medical bills, and other types of debt.

The Pros of Debt Consolidation 
Now that we’ve talked about what debt consolidation is, let’s talk about the pros and cons of debt consolidation. Here are the advantages of consolidating your debt:

  • One Monthly Payment
    One of the biggest advantages of debt consolidation is that you’ll only have to deal with one monthly payment. If you have trouble staying on top of your bills, this can prove to be very helpful.
  • Lower Interest Rates
    When you consolidate your debt, you can hopefully work out a lower interest rate. This is especially helpful for those who are paying upwards of 20 percent interest rates on their debt.
  • Pay Off Debt Faster
    With one monthly payment and lower interest rates, you’ll hopefully be able to pay off your debt faster. Instead of drowning in debt due to high-interest rates, you’ll be able to put a dent in your debt each month.
  • Avoid Credit Damage
    By consolidating your debt, you’ll be able to stay ahead of it. As a result, you’ll hopefully avoid damaging your credit score due to missed or late payments.

The Cons of Debt Consolidation 
With all the benefits of debt consolidation, there are a couple of downsides. These include:

  • You May Be Tempted to Use Your Cards Again
    Consolidating your debt will mean your existing accounts will have zero balances. Therefore, it can be very tempting to start making purchases on these cards before paying down your debt. However, if you sign up for a debt management program, you can get these accounts frozen.
  • You May Dig Yourself Into a Deeper Hole
    Once your debt is consolidated, you need to make sure you stay on top of your payments. Otherwise, you risk damaging your credit and facing additional financing penalties.

This is why it’s very important to choose the right debt consolidation strategy. This blog can help you choose the right one.

Pros and Cons of Debt Consolidation: Are You Ready to Consolidate Your Debt? 
Now that you know about the pros and cons of debt consolidation, it’s time to decide if it’s right for you. Hopefully, this strategy will help you get out of debt in no time.

Be sure to check back in with our blog to learn more strategies for dealing with debt.

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Understanding Debt: Pros and Cons of Debt Consolidation
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Are you doing your best to understand debt? Read this article to learn about the pros and cons of debt consolidation to learn what's necessary.
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