Cons to consolidating debt

Lumping all your debt into one place (perhaps secured against your home) and having lower monthly repayments could tempt you to take on additional short-term borrowing, building your overall deficits into a fiscal time-bomb.If you feel you'd be tempted to fall into this type of destructive borrowing then a debt consolidation loan really isn't for you...

That's because they'll lose a chunk of the interest you would have paid if you'd stuck to the original terms.

This is often done to secure a lower interest rate or for the convenience of paying only one loan.

Although debt consolidation has its advantages, there are also unforeseen negative consequences that need to be considered, says Clark Gardner, CEO of Summit Financial Wellbeing."Our opinion is that the negative consequences outweigh the benefits."Advantages• Making a single payment.• The consolidated instalment may be less than the combined original instalments. Many consolidation companies charge very high upfront fees and interest rates that are close to the maximum allowable rate for mortgage loans.

Debt consolidation is not the same as debt settlement.

In debt consolidation, you pay your debt in full with no negative consequences to your credit.

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