Debt Consolidation – Is It Worth It?
Most finance counseling would recommend debt consolidation for your numerous credits, and consumers would likely say that it is the best option. Debt is a commitment and debt reduction always requires some sacrifice. Debt consolidation loan is a loan which pays off many other debts or lines of credit. But how do you know it’s a good deal? Before you proceed, considering the pros and cons of uk debt consolidation service is a wise thing.
There are some advantages of consolidating your debt. Firstly, single monthly payment simplifies money management and all your debts will be brought together with one lender. Instead of paying various dues to various creditors, you now only have to pay a single installment per month. You will have to make payments to and deal with just one company. So, you will have an easier time making your payments and avoid late fees, extra charges, and the bad credits that inevitably results when you can't afford to pay regular bills.
It gives interest rate reduction. While most debt consolidation loans are secured with a second mortgage on your house, the interest rates are much less than unsecured loans like credit card purchases because they have nothing except your word and your history.
Monthly installments are minimized. The amount you have to pay monthly is typically decreased because the interest rate is lower and because you have one payment versus many. It also creates tax breaks. Your loan’s interest can be deducted from taxes. The interest paid to a credit card is money down the drain, while the interest paid to a mortgage can be used as a tax write-off.
On the contrary, you will end up paying more in the long run. Consolidating your debt will still make you owing the same amount of money. Usually, the difference is the length of the term. If the term is really long, this could only leave you paying more interest.
Paying off your debts will take you longer time. The length of mortgaging usually takes ten to thirty years. Instead of spending a couple of years getting out of credit card debt, you will be spending the length of your mortgage getting out of debt.
You could have even more debt to consolidate. Because of the easier load and having extra money left over, it might be easy for you to start using your credit cards again or continue your impulse spending habits that got you into the quicksand of debt.
Losing everything is a danger. Consolidation loans are called secured loans. If you don’t pay an unsecured credit card loan, it results a bad rating to you, but your home is still secured. While if you don’t pay a secured loan, your home which is the one that secured the loan may be taken away from you.
It’s Up to You to Decide
No matter how long it may take or how difficult it may be to do it, getting out of debt is well worth it. If you are thinking of debt consolidation as number one on your debt solutions list, then think over the pros and cons first.