The advantages of debt consolidation

Having one larger loan rather than more smaller ones can save you significant time and money

13:59 03 November 2013

Debt has the tendency to attract more debt. You may first borrow money for something you really need, and then, seeing how that worked out, borrow again for something you don't necessarily need. In time, you end up having to repay so many debts – which are not always large – that you become stressed and concerned. Debt consolidation may be a good way to handle these types of situations, so let's take a closer look at how it works and how it can help you.

• Debt consolidation means that you sign on a larger loan that you use to repay the rest of the loans. This frees your time, as you don't have to struggle with all of the smaller loans each month, and can also save you money if the new interest rate is lower;

 

• In order for debt consolidation to work, you have to carefully look through the papers before signing them. Even if the interest is lower than what you pay now, there may be hidden fees or the rate may increase in time. And you wouldn't want that on a loan that stretches over a period of seven years;

 

• If you don't qualify for a debt consolidation, you may look for a secured loan alternative. This means that you will have to sign your house as collateral. It's a good way to get the money you need, but only do this if you're sure that you can repay it in time. Otherwise, your house is at risk.

There are many financial institutions that can give you access to debt consolidation, so make sure that you shop around and find the best deal you can get. Remember that this is a long-term loan, so every detail is of great importance.