15 May What are the Risks and Rewards of a Debt Consolidation Loan?
Are you cracking under the pressure of late bill payments and mounting debt? If your financial obligations seem to be closing in on all sides, you may want to take out a debt consolidation loan. Consolidating your debt can be an effective method to stabilise your finances and get on top of your debts, but debt consolidation loans don’t magically make all your money problems disappear. You still need to practice good spending habits, and fiscal discipline.
So are debt consolidation loans worth the effort, or will they cause more problems than they solve? The truth is, much of your debt consolidation success will depend on you, but knowing the risks and rewards can help you prepare to take back control of your financial future. Continue reading to learn how to navigate the risks and benefits of debt consolidation loans.
What are the advantages of a debt consolidation loan?
Rather than making half a dozen payments every month to get caught up, you can bring all your accounts current and make only one payment per month going forward. This greatly simplifies your finances, and therefore makes them easier to manage. Your monthly loan payments will also likely be less than the total payments you were making before, spreading your debt over a more manageable period of time.
Debt consolidation loans NZ-wide can often be borrowed at fixed rates and on fixed payment schedules, adding stability to your books. For example, if you are borrowing with a healthy credit score and meet certain lending criteria, your new interest rates could add up to less than the late fees or interest you were including in your previous bill payments. Also, because your debt consolidation loan goes directly into your existing debts, you are unable to spend the money on other purchases, mitigating the temptation to rack up further debt.
Why should I be careful with a debt consolidation loan?
Debt consolidation loans can be incredibly helpful if you make use of them responsibly. However, while a loan will bring your credit accounts current, it won’t prevent you from running up debt on those accounts again. If you fall behind on your payments for your new plan, it will be more difficult to get caught up again.
Secondly, the longer you take to pay off your debts, the more you are spending. This becomes more likely with lengthier repayment plans, which make it easier overall to meet your monthly payments, but will add up to more money in the long run. Remember, your credit score will drop should you fail to keep up with your loan payments, which could make future borrowing more costly as well.
Take back control of your debt
Consolidating your debts can be intimidating. That’s why the friendly and helpful lending professionals at Max Loans are here to make it easy. If you want to get back on top of your finances, contact Max Loans today for a quick assessment!
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