What is Debt Consolidation, Should You Consider It & What are the Pro’s & Con’s?

Paying off more than one debt at a time is not uncommon and for some people keeping up the repayments on a credit card, a personal loan and a home loan can be a struggle.

This is where Debt Consolidation may well be worth considering.

Debt Consolidation is simply rolling 2 or more debts into the one loan with one monthly repayment.

For example you could consolidate a credit card and personal loan with your home loan.

So what are the Pro’s and Con’s of Debt Consolidation?

Pro’s

* There’s only 1 loan monthly repayment to manage.

* The new repayment could be lower than the total of the individual repayments.

* The interest rate could be lower on the consolidated loan.

* If you are at risk of defaulting on the repayment of one of your credit cards or personal loans, it could protect your credit rating.

* If the repayment savings are used as extra repayments on the new loan, it could reduce the loan amount faster.

Con’s

* If a personal loan and credit card are consolidated with a home loan, if the borrower is unable to make the monthly payment, the property securing the loan could be at risk.

* It could cost more by converting short-term debt (like a car loan) into a home loan (long term debt). This means that the car that you would have paid off after say 5 years is still being paid off on your home loan say 20+ years later.

* If you pay out a credit card you could be tempted to establish a new credit card and this could put you in a position of a higher total debt than before the consolidation.

* It only makes sense if the new repayment is lower than the total of the individual repayments.

If you are considering debt consolidation I can provide you with the following information;

* What you can expect the new repayments to be

* What you can expect the new interest rate to be

* What the potential savings could be.

With this information can you can then weight up the Pros & Cons and determine whether debt consolidation is for you.

If you or any of your family and friends would like information so you can work out if Debt Consolidation is for you please call me on 0408 648 107 or email danny@dannycook.com.au