Advantages and Disadvantages of Debt Consolidation

What do you know about Advantages and Disadvantages of Debt Consoludion?

Debt Consolidation:

Consolidating your existing debts is another viable option to get out of debt. Prior to taking the debt consolidation route take a look at its pros and cons.

Advantages:

* You have to make just one payment at the end of each month. It has been noticed that the average citizen pays 12 different creditors every month. Therefore, it becomes very difficult for the individuals to figure out whom to pay. With the help of debt consolidation all your debts are being combined, this makes managing your finances much easier.
* Debt consolidation can significantly reduce high interest rates.
* With reduced interest rate and one monthly payment, the amount you have to shell out each month is decreased significantly.
* If you are planning to use a first or second mortgage as a debt consolidation loan then the interest is tax-deductible.


Disadvantages:

* Reduced monthly payment indicates easier load to bear and more money left over at the end of the month. This might tempt you to take on more debt.
* Even though the interest rate is reduced, the repayment period is extended. Thus, you may end up spending more money than what you would have if you had kept each individual loan.
* You can lose everything. If you take out a secured consolidation loan against your home and you miss two to three payments, in that case you might even lose your home.

Ps: I believe, my husband now about this one.