Convenience of Consolidating Debt
Having a lot of loan or debts from different principalities is a little difficult to manage. You need to track down all debts from all creditors, including the interest expenses and late payment charges. One solution in handling multiple debt is through Debt Consolidation.
Debt consolidation involves taking one big loan to pay all the existing debts and manage that single loan for easy debt management.
There are advantages and disadvantages in doing this if you are trying to eliminate debts. I believe you need to know both of them before agreeing or disagreeing to this method, and these are:
Advantages of Debt Consolidation:
- Easier debt management since you are managing only single debt vs multiple debts.
- You can choose for longer periods of debt repayment
- You may choose a lower monthly payment
Disadvantages of Debt Consolidation:
- The total amount of debt repayment is higher than the original debt principal
- The longer the debt repayment and lower monthly payment may result in higher interest in the long run.
When it comes to loans or debts, the general rule of thumb is, “Pay the debt the soonest possible time with the highest amount you can possibly repay.” The more you can do this, the more you can lower the interest you are paying..
I suggest that, before opting to any debt consolidation program, think about this first if this will really give you debt repayment convenience.
Otherwise, if you think you can’t handle this too, then better to continue what you are doing right now. We don’t want you to get trapped in another debt you can’t handle. But if you think this is something you can handle and eliminate your debt the soonest possible time, then act on this before it’s too late.
The goal here is to eliminate your debts that are keeping you from saving money for future investments and possible lucrative opportunities that may come your way. Once you are debt free, then make sure if you are creating another “debts” this will become your leverage to create passive income to work your way to financial freedom.
More about “Good Debts” on the next blog post.
For your Financial Health,
Doc pinky
