Even if you do owe money to multiple different creditors, debt consolidation might not be right for you. Here are some basic pros and cons to help to guide your decision.
Debt consolidation helps you to stand back and take a breath. By consolidating all of your payments into one, you’ll have a much easier time managing your finances and strategizing how you’ll get out of debt.
Debt consolidation can also help to save you a lot of money in the short term and the long term. In the short term, you might end up paying less each month than you did with multiple different minimum payments, keeping more money in your pocket. In the long term, you might get a more forgiving interest rate and pay less interest over time as well.
Debt consolidation can also help you to see a light at the end of the tunnel when it comes to your debt. When you’re juggling a bunch of minimum payments, it can feel like you’re not making any progress towards becoming debt-free. With debt consolidation, as long as you keep up with your payments, you’ll have a clear path towards eliminating your debt.
Debt consolidation, especially debt consolidation loans, can be hard to get if you have bad credit. Potential lenders look to your credit score to determine if you’re safe to lend to, and if they don’t like what they see, they won’t approve your loan application and you’ll be back to square one. Since faltering credit scores are often tied to missed debt payments, a lot of people who could really benefit from debt consolidation end up with bad credit and don’t qualify for decent loans.
Debt consolidation is also a means to an end, not a solution by itself. All you’re doing is making your current debt easier to deal with. If you can’t get your financial house in order and stop using credit, you’ll just end up in the exact same position you are now: heavily indebted to multiple different creditors.