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So the best option is to discuss the issue with your advisors to get a proper idea of how to avail the debt consolidation services and how to avoid the pitfalls.
There are many benefits that come with consolidating your debt in one single loan if done properly, below I will list some of the most common benefits to getting a debt consolidation loan: Elimination of Penalties and Financial Charges: In most cases, when debtors fail to pay their dues, financial charges and penalties are stacked on the default amount.
This leads to a growth in the default amount, increasing the burden on the debtor.
The debt consolidation loan eliminates these extra charges, keeping the debt amount constant.
For ex: a debt of $500, may increase to say $700 on account of the charges.
A debt consolidation loan will bring this amount down to the main default amount of $500.
A Single Monthly Payment to Pay Off All Debts: A debt consolidation service enables a debtor to cover all debts including credit cards, medical bills, and other unsecured loans with a single monthly payment for all debts.
The debt consolidation company disburses those funds to all the creditors at rates agreed upon between them.
This reduces the amount of money that the debtor has to pay out, and the chances of forgetting dates and being late is minimized.
Lower Interest Rates: Debt consolidation services work out new interest rates on extensive negotiations with the creditors.
This leads to a restructuring of the debts with payments much less than what existed.
For example: if the debtor was paying 15% interest earlier, it can be negotiated to say 11% by the debt consolidation counselors.
No More Warning Calls: Once a debtor approaches a debt consolidation service, and asks them to help with a debt consolidation loan, the Company represents him and negotiates with his creditors and informs then that they are representing the debtor on their behalf.
This helps to keep those calls from collection agencies at bay.