Pros and Cons of Debt Consolidation

Main drawbacks of consolidation


  • 1. You must think VERY carefully and seek professional advice before you borrow money against your home as it could be repossessed if you dont keep up the repayments.

  • 2. Debt consolidation can be dangerous if youre not sure that you can avoid using your credit cards store cards overdrafts etc. If you run up fresh debts youll be in a worse position than before as youll have to repay your consolidation loan / remortgage as well as your new unsecured debts.

  • 3. The repayment term on your consolidation loan / remortgage may be substantially longer. If so youll pay interest for longer so you may end up paying more in total.



Main benefits of consolidation


  • 1. Making one monthly payment is much simpler than dealing with multiple debts to multiple creditors.

  • 2. It can also cost you less every month if you've:
    a. used the loan to pay off high-interest debts e.g. store / credit cards and / or
    b. arranged to pay back the new loan over a long time period.

  • 3 As a result you could be less likely to miss payments therefore avoiding extra charges and damage to your credit rating.