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Should You Go For Debt Consolidation this Coming Year?

Paying off debt, credit cards, and your mortgages can be quite daunting, what with all the high interest rates that come with each. With the right strategies and solutions, you can easily alleviate the burden of having to pay off these debts. One such solution would be debt consolidation. Many people attest to this as an effective way to get their financial situation back in good standing after being haunted by multiple debts.

 

What is Debt Consolidation?

 

Coming from the name itself, debt consolidation allows a person to combine his or her debts, usually including his mortgage, into one single monthly payment. Before considering this option, it’s important to weigh your pros and cons, and to understand what the advantages and the disadvantages are. The overall aim of debt consolidation is to help people lessen their high-interest payments, therefore saving them money while paying off more debt in a shorter amount of time.

 

Instead of being held back by mountains of debt, using your mortgage as a solution can be an attractive option. With this, you can lower your interest rates by combining your debts and mortgage into one.

 

How to Know If Debt Consolidation’s Right For You

Even if debt consolidation seems certainly attractive as it’ll allow you to pay, for example, all your credit cards debt into a single payment, you’ll still have to do your research before jumping right in. Here’s what you can do to determine if debt consolidation is perfect for you:

 

 

  • Calculate all your credit card debts along with their interest rates. Note how long it’s going to take for you to be able to pay them all off. Compare it to the length of time available in the debt consolidation option. If you’ve seen that it will take you faster to finish paying your credit card bills individually, then it might do you good to steer clear of debt consolidation.

 

  • Make sure that the amount of money you’ll be paying for debt consolidation is at least the same amount as what you’ll be paying for your credit cards individually. If it appears to be a bit more but it fits your budget, you might want to opt for this one instead of going for the lesser amount, which often means higher interest rates and longer paying time.

 

  • Debt consolidation loans will help you pay off your credit debts, but this doesn’t mean you’ll be safe from debts in the future. If you think you’re likely to arrive at the same situation again, buried in debts and struggling to pay it off, then a debt consolidation loan might just add to your problems. The last thing you want is clearing off your debt, then slowly building them up again. This won’t help you in the long run.

 

If after you’ve done the steps above and have assessed that debt consolidation will work for you, then you should take advantage of this option so you can get back on the right track. Just make sure to adopt the right discipline when handling your finances in the future to avoid getting stressed with having to pay off your debts.