You see debt consolidation advertised every where as the key to freedom from debts. For those struggling with debts, the claims made by the advertisers can be quite attractive. However, you need to implement this solution wisely; otherwise you will not get the desired results and might even have to face more problems. This is one thing that the advertisers do not tell you.
Thus, as long as you go about consolidation of your debts wisely, the option can improve your situation. There are a few things to be considered before opting to consolidate your debts.
Firstly, you need to know whether you can get an interest rate and installments low enough that the option proves to be beneficial for you. The whole point of debt consolidation is to decrease your monthly payments and interest rate. If you can find a loan with which you can pay off all your earlier loans and get reduced monthly installments and interest rate, then the whole deal is worthwhile. If you cannot get a loan with lower interest rate and monthly payments, then you should not consolidate your debts at this moment. Also, ensure that you can afford to pay the monthly installments. If you cannot, then do not opt for taking a consolidation loan. This is because, if you take a secured consolidation loan and then cannot repay it, you will be at a risk of losing your home or any other asset that you have taken the loan against.
Secondly, you need to be careful that you do not use your credit cards and take additional loans. When you have cleared your current debts and are able to save some money every month, you may be tempted to go on a spending spree and use your credit cards. Thus, you will have more loans to repay along with the consolidation loan. Therefore, when consolidating your debts, you should close all your credit card accounts to prevent this temptation.
However, these things do not mean that you should not consolidate your debts. By all means, go for debt consolidation but implement the plan wisely.