If you have a number of different debts, you can take advantage of debt consolidation and combine them into one. Many people choose to consolidate debt because they feel it will be a lot more manageable to only have to make one monthly payment.
But that’s certainly not the only reason.Other people prefer to consolidate their debt because by doing so, they actually have a chance to save additional money.
Not only that, it’s a lot easier to pay off your debts quicker when you have consolidated all of them into one simple monthly payment. According to Consolidated Credit, experts helping you see whether consolidated credit is good or bad, “Debt consolidation opens a pathway to addressing the damaging impact of excessive credit utilization.”
Although there are many people taking advantage of the debt consolidation opportunity, some people will not benefit from it. Unfortunately, there are even people that end up in even worse shape after they consolidate.
Well, now that they have consolidated all of their debts, they often take out new credit cards. And because of their additional debt, they now have a difficult time keeping up with their payments.
On the other side of the coin, there’s good news as well. Many people that consolidate their debts finally get to take control of their finances. And this makes a world of difference in their lives.
How to Determine If You Need to Consolidate Your Debt
Before immediately beginning the debt consolidation process, there are actually a number of questions that you need to begin asking yourself. Based on your answers, you’ll be able to determine if debt consolidation is the right choice for you.
Do you seriously want to get out of debt?
If you are serious about getting free of debt, then debt consolidation is going to be a good option for you. On the other hand, if you are attempting to consolidate just because you want to lower your interest rates and nothing more, this might not be the best option for you. Before consolidating, you really need to reconfigure your lifestyle and think about making some positive, powerful changes.
Can you currently manage your debt?
To figure this out, take a look at a comparison between your income and debt. Some questions to consider include: Will you be able to realistically pay your debt off entirely within a period of five years? Is your current unsecured debt less than half of your total gross income?
If you answered yes to each one of these questions, then you should seriously consider consolidating your debt because it’s a good option for you.
Do you have uncontrollable debt?
On the other side of the spectrum, if you answered no to either of the questions mentioned above, then it will be nearly impossible to get out of debt within a five-year time frame unless you come into a large sum of money.
If you find yourself in this situation, first of all it’s nothing to be ashamed of. Many people run into debt issues, and it especially happens when we are young.
Second, instead of doing nothing about it and letting your credit get completely ruined, you should contact a debt counselor to find out about your options.
If things are really bad, it’s quite possible that you’ll have to file bankruptcy in order to get back on the right path.
But at the end of the day, you should meet with a credit counselor because they’ll help you come up with a budget, create a debt management plan, and help you work toward getting out of debt once and for all.
Debt consolidation is a good option if you meet the criteria mentioned above. If not, you should consider taking a different path instead.