When do you avoid debt consolidation?

[Holicent]

The first thing to consider about debt consolidation is that it's not for everyone. It may be a good choice for a few people, but if you're in the majority and have high-interest debts, you'll have more fun trying to get out of debt than consolidating. If your debts are high-interest credit cards and other unsecured debt, then you should consider using an alternative solution instead of debt consolidation.

Debt consolidation is also a bad idea if your debts are low-interest loans such as mortgages or student loans. This is because these types of loans are often repaid over time and not lumped together with other debts. They also tend to be paid off with regular payments rather than one large payment at the end of the loan term or loan period.

 

[cmoneyspinner]

I have used a debt consolidation service. If you have high credit card debt, that's the best way to go. They contact your creditors so that they can stop continuously increasing your balance by adding on more charges for nonpayment and constantly calling you and hounding you about paying; they lump all of your debt into one balance; and they give you a reasonable monthly amount to pay every month. If you follow the plan, you can usually get your debt paid off in a few years.

 

[Ayuba Ernest]

Debt consolidation can be a helpful tool for getting your finances back on track. But there are also times when it may not be the best option for you. Here are four situations when you should avoid consolidating your debt:

1. When you have a good credit score

If you have a good credit score, you may be able to qualify for a 0% interest rate credit card. This can help you save money on interest and get your debt paid off faster.

2. When you can afford to make higher payments

If you can afford to make higher payments, you may be able to pay off your debt faster without consolidating.

3. When you have a low interest rate

If you have a low interest rate, consolidating your debt may not save you as much money in interest.

4. When you have a limited income

If you have a limited income, consolidating your debt may make it difficult for you to make your monthly payments.

 

[Suba]

Debt consolidation means merging several debts into one debt platform with a larger value, this means a change in the structure of debt payments, so that we only need to pay one installment in a larger amount. So before you do a debt consolidation, you should pay attention to several factors such as, the loan term is longer, and often there is a lower interest offer, the monthly debt repayment installments will be lower. Debt management will be easier because you don't have to think about how many installments you have to pay. You also need to think about the consequences of debt consolidation, your debt period will be longer. so that it will increase the accumulation of loans compared to the total amount of the previous debt. So before you do debt consolidation you have to make proper financial planning.

 

[Mika]

Debt consolidation is refinancing your loan. You get a loan so that you can pay your all loans to have just one loan. There are two purposes of debt consolidation, one, you have just one debt instead of multiple debts, which makes you easier to repay your debt, and two, you get a lower interest loan so that you can pay your higher interest loan. However there are situations when you should strictly avoid debt consolidation. For example, if your new loan has higher interest rate compared to your existing loan. For example if you are paying 7 percent interest on average for you 5 diggers loans and when you get debt consolidation loan at the interest rate of 8 percent, you should avoid debt consolidation at any cost. Secondly, you also need to check repayment term If the loan repayment installment is higher than you can afford, you also should avoid debt consolidation.