Should you consolidate your debt? If you are the type of person who has accumulated different types of debt over the recent past, this is an issue that you will definitely have to deal with at some point. There are many people who have arguments for and against the process of debt consolidation, and most of them often have very good points on both fronts.
However, the most important thing to remember when you are thinking of consolidating debt is that your unique needs are the ones that actually determine the benefit of doing so, and you should therefore depend on them to make the decision. Just because someone else did so in the past and either had an excellent or bad experience does not mean that the same will happen to you, since your circumstances may be different.
This therefore means that when thinking of doing debt consolidation, you should always think the entire process through in the context of your life. Some of the specific things you ought to take note of when doing this include:
You might not need to consolidate all the debt
When you choose to do debt consolidation, this does not necessarily mean that you should lump all the debt you have in one vehicle. There are times when you will find it more beneficial to leave some types of debt out of the equation, since it might be cheaper for you in the long run. This means that once you have made up your mind to carry out the process, you should carefully analyze the benefits of consolidating the different types of debt you have, so that you don’t end up making this mistake.
Many times, this will involve taking stock of your current financial situation carefully. If you are not very good at doing this, it would be advisable to get the help of a financial advisor to help you figure it out. Most of the firms that offer debt consolidation services will also have such professionals on board, and you can draw on their years of experience.
In some cases, you can use it as a form of refinancing
There are some companies that will combine debt consolidation and refinancing in one easy to use package. This means that they will take over all the different types of debt that you have, so that you will now owe money to only one entity. In addition to that, they may also advance you a loan that will be added to this sum.
If you are interested in using this feature either for investment or to get yourself out of a rut, you should understand that there are implications to doing so. The most significant of these is the fact that you might need to pay slightly higher interest rates than before, especially if you are going to use the refinancing option. This calls for you to carefully weigh the pros and cons of doing so before taking the leap, so that you can make an informed decision.
It makes it easier for you to track your payments
There are many people who have debts with many different firms. This makes it difficult to follow up on payments particularly if you lead a busy lifestyle. Consolidating the debt means that you will only owe money to one entity, and this in turn means that you will be making payments to one firm once a month. This makes it much easier to keep track of your finances, and not forget to pay your bills. Some of the secondary benefits of doing this include avoiding the penalties that most firms will charge when you inadvertently skip the monthly payments.
Not all firms will have your best interests at heart
On the surface, debt consolidation is a great idea, and it will make your life more convenient. However, you also need to take note of the fact that there are some firms that will take advantage of you. For instance, you could get the debt consolidation service, and then later have the company change the terms of service against you.
The best way for you to avoid finding yourself in such a rut is by consulting firms that have a lot of experience in the field and who have built a name for themselves for being trustworthy. It’s also wise to go through Canadian law to find out what rights you have as the consumer in as far as using such products is concerned.
In the end, debt consolidation is a great service that will benefit you in many ways. However, you need to be careful with how you use it, since it can be a double edged sword at times. Keeping the above in mind will help you not only identify the best consolidation service, but also get the most out of it as well.