Debt Consolidation Pros And Cons

Good Essays
Debt consolidation may seem quite attractive and from the various purported benefits listed in every promotion for such services, it makes the realistic approach for many who may have limited insights about the area. Many hope that debt consolidations lead to paying less which is what they are led to believe. However, a keen look into the framework of debt consolidation reveals otherwise.

Evidently, you will be paying much less installments per month after consolidating your debt and this can be great relief. In debt consolidation, the interest rate is slightly dropped by one percent or two and the repayment period is significantly extended. Obviously, paying for much longer results in smaller installments but staying in debt longer is also
…show more content…
However, it provides a comfortable repayment plan stretched over many years. Claiming that debt consolidation is ultimately good or bad is clearly biased. Nonetheless, the plan is not for everybody. Some people may be greatly relieved by a debt consolidation plan especially if your current income is not sufficient to pay up all the debts. A consolidation plan may be able to cut down the monthly installments to a figure that you can comfortably spend per month. However others are better off just using the original repayment plans. If you can pay off monthly installment without any pressure, there is simply no reason to consolidate your debts. Investors can also take loans from different loaning institutions to start an income generating project that can pay off monthly installments in a consolidated debt plan for all the years therein. The benefits of consolidating your loans are quite obvious and straightforward. You will pay lower installments per month and can therefore remain with something small out of your income. In fact, this is the only real benefit of debt consolidation. It cuts down your monthly installments and gives you more years in your debt repayment plan. The downsides are also conspicuous; you will end up paying more debt than if you used the original

Related Documents

  • Decent Essays

    So the more the loan, the lower the interest rate charged on the loan. Debt consolidation is useful as a saver when paying interest. In essence, by consolidating all your debts into a single debt you can easily manage transactions through a single monthly payment making easier for you to get out of debt. The steps that must be considered…

    • 387 Words
    • 2 Pages
    Decent Essays
  • Decent Essays

    Payday Loans Advantages

    • 451 Words
    • 2 Pages

    Payday lenders seldom report to a credit agency when you pay back a loan on time. This is mostly because it is a one shot deal. You borrow, then pay it all back in one lump-sum payment. Of course, if you fail to pay it back the cash advance, you will be reported to a credit agency, just like any other lender, but the thing to remember is that there is no upside to a payday loan when attempting to build up your credit. Take the time to look for personal loans that are available to you, and compare them to a payday loan; you may be surprised at what you qualify for.…

    • 451 Words
    • 2 Pages
    Decent Essays
  • Decent Essays

    Debt Informative Speech

    • 1308 Words
    • 5 Pages

    It didn’t make me rich, but it sure helped me pay off my debts faster. Also, I got a promotion at work and a pay rise of 19%. 7. Keep at It Getting out of debt will take time – sad, but true. It can take you years to reach debt freedom.…

    • 1308 Words
    • 5 Pages
    Decent Essays
  • Decent Essays

    Monthly finance charges, fees, and penalties can become quite costly over time. However, there are a few ways to save on your credit card bill. Use credit cards only if you have the money to pay off the balance. If you stick to using credit only for things you can already afford, you will not run the risk of carrying balances from month to month. Although this is much easier said than done, consider the…

    • 851 Words
    • 4 Pages
    Decent Essays
  • Decent Essays

    When people are in debt, there are many debt management companies that are willing to help them. They manage the debt that someone is in by taking one monthly payment; working with the lower payments and lower interest. But the person can also manage their own debt, without help of others. It is not an easy task, but people are able to do it. According to Dave Ramsey, good debt management is 80% behavior and 20% head knowledge.…

    • 838 Words
    • 4 Pages
    Decent Essays
  • Decent Essays

    Similar to the debt ratio, this reduction in total liabilities compared to ownership of the company is a positive trend. The company is successfully reducing its debt burden and likely increasing its stock value. This trend would please investors. Limitations There are many limitations with the information these ratios can provide. Liquidation and solvency are estimated values as assets may not be able to be sold at value.…

    • 875 Words
    • 4 Pages
    Decent Essays
  • Decent Essays

    Although defined benefit plans are better for an individual employee, defined contribution pensions are better for a nation because what an individual puts into their plan, is what he or she gets upon retirement. Therefore, defined contribution pensions reduce costs to employers, taxpayers, and shareholders. Many Americans save too little, but one can break away from the statistics to build a financially secure retirement plan by in the beginning of their careers by using a 401(k) or an IRA. It is better to look forward to retirement with a peace of mind knowing there is a monthly paycheck than working the rest of one’s life without relaxation. Start looking into retirement plans now; you will be glad you did in the…

    • 1188 Words
    • 5 Pages
    Decent Essays
  • Decent Essays

    Cameron Financial Ratios

    • 1571 Words
    • 6 Pages

    Both companies have seen improvements in their current ratio as they both move to reduce risk by reducing short-term debt. 6. Working capital management Days debtors shows how quickly customers are paying their accounts, and for both companies the majority of this is for advertising, and the result of this ratio has an impact on the investment in working capital. Days creditors indicate how quickly the company pays suppliers, and can indicate the use of supplier credit as a source of finance. Both companies have stable ratios that fall within acceptable range of industry average, with little change required, and little effect on any investment recommendation in this report.…

    • 1571 Words
    • 6 Pages
    Decent Essays
  • Decent Essays

    Personal Finance Tool

    • 1060 Words
    • 5 Pages

    Now minus the Total Liabilities from the Total Assets When a business gets a negative number they have to increase their income, cut expenses, or borrow money to stay operational. With personal finance, the outcome is the same, except borrowing more money should not be one of the options. Now, refer to the discretionary money number that you calculated earlier. Does the number have more clarity now? Just like a business, long term assets can be sold to add cash to the short term assets, and long term liabilities can be retired quicker with cuts in short term liabilities.…

    • 1060 Words
    • 5 Pages
    Decent Essays
  • Decent Essays

    Betting Vs Bookies

    • 1205 Words
    • 5 Pages

    The investment may be dissolved very quickly without losses, which means putting your money into flexible savings accounts that usually only produce a small amount of interest. You need to add to your emergency fund every month. This means it is going to grow increasingly large as time goes on, but if you are building wealth correctly, then you will need a larger emergency fund. The point of an emergency fund is to help ensure you do not dip into your investments in any way. It is your guarantee of future wealth.…

    • 1205 Words
    • 5 Pages
    Decent Essays

Related Topics