Pros and Cons of Debt Consolidation

If you are looking for a way to manage your debt, debt consolidation is an option.  Before deciding if this is best for you and your financial situation, you will want to consider the pros and cons of debt consolidation. 

One of the biggest advantages of debt consolidation is that instead of making payments to multiple creditors, you can make just one monthly payment to one lender.  You may find this advantageous if you have trouble keeping up with all the payments to be made, or if you find it difficult to budget so that you have enough money left at the end of the month to make all of your payments.  Another big benefit of debt consolidation is that instead of the uncertainty that comes along with debt, you will know the date when you will finally be debt free.  

The debt consolidation company will negotiate with your creditors to obtain lower interest rates on your credit cards or loans.  In some cases, they can reduce or even eliminate late fees and penalties.  This will reduce the total amount that you owe.  Your one payment will also be less than the multiple payments that you were making before, which will free up some extra money each month.  In addition, after the debt consolidation company has made arrangements with your creditors, you will no longer have to deal with those embarrassing collection calls and letters. 

While there are many pros to debt consolidation, there are some cons to keep in mind.  Though the role of the debt consolidator is to act as your advocate, you are surrendering some control to them.  Once you are on the debt consolidation plan, you will no longer have the ability to personally negotiate with your creditors on your existing debt.  Also, when you get on a debt consolidation payment plan, you are committing to a payment that must be made every month.  Missing your debt consolidation payment could have even more dire consequences than missing a payment on one of your individual credit accounts.