Consolidating debts pros cons

Debt consolidation loans are usually stretched over a long period, which means that your total interest payments add up to a very expensive debt.Paying off short term debts like credit cards and personal loans over much longer periods, even at a slightly lower rate, actually means paying a lot more interest in the long run.

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Although debt consolidation has its advantages, there are also unforeseen negative consequences that need to be considered, says Clark Gardner, CEO of Summit Financial Wellbeing."Our opinion is that the negative consequences outweigh the benefits."Advantages• Making a single payment.• The consolidated instalment may be less than the combined original instalments. Many consolidation companies charge very high upfront fees and interest rates that are close to the maximum allowable rate for mortgage loans.After reviewing the terms of your accounts, and using a debt consolidation calculator, you’ve decided that debt consolidation is a good solution for you.Your next step, then, is to choose a method for consolidating and paying off your debts.It can be a sound strategy, but because there are so many different ways to consolidate debt -- some better than others -- you need to consider all the pros and cons.Bruce Mc Clary, Vice President, Communications at the National Foundation for Credit Counseling (NFCC), says a consolidation loan can sometimes save money in the long run if it has a lower interest rate and fees.