If you are struggling with multiple debts and have to deal with many creditors calling you about their due repayment, then it is time that you thought of debt consolidation as part of you Debt Management strategy.
This is a concept that allows you to borrow a big sum from a single creditor and have a monthly repayment arrangement with that creditor. The main advantage is that the monthly repayment amount would not be as high as your current one and though you would have to make repayments for a longer period, this arrangement would provide you with some relief from the relentless pressure of debt.
It is however better to consider the following before you opt for debt consolidation:
- Make sure that you take a full settlement figure from your existing lenders and do not keep anything pending. That is because you may have to pay some levies due to early foreclosure of your existing debt.
- Having established what you actually owe, you must now make out an income and expenditure statement to determine whether you would be able to keep your new repayment commitment. Do not forget to make a provision for exigencies. Only if you are then confident that you can keep your repayment commitment should you opt for debt consolidation. This stage is intergarl to the success of your Debt Management Plans
The advantages of debt consolidation loan can thus be summarised as under:
- You will be able to bring down your existing monthly repayment amount.
- You can shake off the pressure exerted by multiple creditors.
- You are answerable to only one creditor.
On the other hand, there are some aspects worth noting as well, which are:
- You have to make repayments over a longer time.
- You would have to shell out extra for getting the new loan.
- If you opt for a secured loan then any default on repayment could compromise your collateral.
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