Can Debt Consolidation Help Me Avoid More Debt?
One of the main reasons why people consider a debt consolidation loan is to get out of debt or, at the very least, cope with their existing debt better. Nonetheless, taking out such a loan doesn’t necessarily mean that your financial difficulties will vanish into thin air. In fact, there’s an old saying according to which there’s no way in which you can borrow your way out of debt. And this is accurate. On that note, borrowing money isn’t necessarily the way in which you can get rid of debt. Still, many consumers are under the impression that debt consolidation can help them. This is true, to some extent, but, in order to make that happen, one has to alter his/her spending habits, as well.
For the most part, debt consolidation is specifically designated for unsecured debt. And when you take this form of financing, you take out a loan that you use for paying off your current debt. This way, you consolidate all the money you owe into a single repayment.
Debt Consolidation – The Bright Side
Consolidation loans are very attractive for Aussies. To begin with, most borrowers want to benefit from lower interest rates. Still, this isn’t always the case, which is why you should assess the lender’s terms before agreeing to anything. What is more, the ease of making one repayment can simplify one’s financial existence. Also, making a lot of monthly repayments increases the risk of missing deadlines. At the same time, it could be said that a debt consolidation loan can help certain people get back on track and keep each payment up to date. This applies especially to borrowers that have the tendency to send out chronically late payments.
To be more specific, this means that you won’t have to pay additional penalties or fees for missing payments. Not to mention that each late payment affects your credit rating, over the course of time. This way, you can be more organised and, thus, deal with your debt more efficiently. Another way in which you can deal with this situation is by setting a spending budget, and sticking to it.
Debt Consolidation Cons
Even though the advantages associated with debt consolidation are self-explanatory, there are also some shortcomings. That is to say, this isn’t the solution to every financial problem. In fact, debt consolidation could actually worsen your situation, if not handled properly. For starters, you should know that debt consolidation doesn’t reduce debt. This loan is created in order to help you deal with debt better, or to be more specific, to help you reorganise your finances. At the same time, considering that you cannot find a lender that offers you more convenient terms than the ones on your existing debt, taking out such a loan won’t help. In fact, in this situation, it wouldn’t make any sense to consolidate your debt.
Moving on, debt consolidation can also prolong your debt. One thing you should bear in mind is that even if you consolidate your debt, in the long run, you’ll repay the same amount of money. The main distinction lies in the duration of the loan. That is to say, the amount of money you pay monthly might be reduced. Still, this will prolong the duration of the loan, which could mean that you might end up paying more interest. The majority of people who take a debt consolidation loan are likely to end up in debt again because this doesn’t address the real trigger of the problem – which is spending more than you can afford. As long as this issue isn’t addressed, the problem will persist.
If you find it difficult to stick to a certain budget, perhaps you should consider taking an accountability partner – maybe this will make it easier for you to avoid spending more money than you have.
The Bottom Line
It’s important to understand the benefits and shortcomings associated with debt consolidation so that you make the right decision. For instance, if you are overwhelmed by the number of repayments you have to make on a regular basis, and this makes you feel stressed out, perhaps debt consolidation would make sense for you. Nevertheless, the only way in which this loan will help you to avoid further debt is if you change your spending habits.
Even if the payment process is simplified, this doesn’t mean you are paying less – unless the loan terms and interest rates are more convenient. In this view, you should look for a reliable lender that understands your situation and is eager to assist you with everything you need, such as Debt Consolidation. If you’ve decided that debt consolidation is the right alternative for you, make sure you contact us today and we’ll offer you all the information you need.