Loan consolidation is a debt management tool that can provide help for reducing the burden of multiple debts. Easy to manage and simple, loan consolidation gives individuals an opportunity to pay for single loan instead.
If you are struggling to repay all your debts, you may consider loan consolidation. Before you do so however, it may be favourable to undergo debt counselling first.
This will help you determine whether you are over-indebted or not as well as if you are a suitable candidate for loan consolidation or not. You should be willing to change your financial habits. It’s important to remember that loan consolidation can be arranged without you being placed under administration or debt review.
What are the pros of loan consolidation?
- You are only liable for a single payment at the end of every month
- You may get a lower installment compared to the original installments
- The interest rate you pay may be lower overall
- When administered correctly, it can be quite easy to manage
- These loans may be in the form of secured or unsecured loans, giving you the choice of being to choose a solution that suits your individual needs
- Many financial institutions offer loan consolidation, so they are easily accessible
What are the cons of loan consolidation?
- It does not mean that your debt disappears. Remember that loan consolidation is a process of debt displacement so you are still liable for paying the new loan in full.
- Fees involved may be quite high. An unexpected rise in interest rates can put you under pressure, leaving you in financial turmoil.
- You’ll be paying for a long period of time for this type of loan. The process isn’t quick to get through – it takes a considerable period of time.
- If not handled diligently, you may end up accumulating more debt.
- If you aren’t prudent, you may end up paying an unscrupulous lender, without the necessary credentials. Make sure you apply only with NCR-registered lenders.