Some debts are genuinely unavoidable, and sometimes, we end up in debt because of bad spending habits. In both cases, a mountain of debt can look and feel very overwhelming to navigate, and in this sort of scenario where different loans have to be paid off, it can get confusing to figure out which loan to pay off first and so on. One solution that has helped a lot of people is a process known as debt consolidation. This is when a new loan is taken by putting all of your different loans together. This makes the process of paying off your loan easier as all of them are lumped together in one big loan. However, it is important to keep in mind that debt consolidation, while a great option for some, still comes with certain conditions and drawbacks. You can click here to learn more, or you can continue reading the rest of this article.
- The process of consolidation will come with additional fees and payments you will have to make at first. So, you will be spending some extra money on annual fees, transfer fees, closing fees, and so on.
- You are not guaranteed a lower interest rate if you choose to consolidate your debt. This option is only available for people that manage to have a good credit score. In some cases, you can end up having to pay an overall higher interest rate with the one consolidated loan than you would with multiple loans with varying interest rates.
- Consolidated loans can take years to pay off, so the interest rate will only increase the longer it takes you to pay it off.
- If you continue to have bad spending habits, then you will only be digging yourself into a deeper pit with consolidated loans.