The following is a guest post
Few things are seemingly as straight-forward as debt consolidation. And yet, few are as controversial and misunderstood. The consolidation of debt has been praised by some as a simple and highly effective tool to allow borrowers with problematic debt levels to avoid the hardships, psychological pressure and severe long-term effects of a bankruptcy. At the same time, it has been criticised by others for offering a false sense of safety and fooling borrowers into schemes which could have them paying more than they originally had to. If applied carefully, however, and overseen by a serious and recognised debt management company, debt consolidation will not just consolidate your finances – but may end up consolidating your life as well.
What is debt consolidation to begin with? Simple: Debt consolidation combines various smaller loans into a single loan. Imagine, for example, a situation where you owe money to ten different creditors. By going through a debt management company, you can replace these smaller loans with a lump sum payable to the debt management company, who will, in turn, forward the money to your creditors. Debt consolidation will also change the structure of the initial payment scheme: Monthly rates tend to go down as part of debt consolidation and loans are becoming more long-term. The effects on the overall height of the loan are ambiguous: In some cases, an effective debt management agency will be able to drive down the debt. In other cases, lower monthly payments and a more long-term approach will have to be compensated for by a higher overall loan.
Be it as it may, there are obvious advantages to debt consolidation. If you are able to pay off some, but not all, of your debt each month, then debt consolidation can help you avoid having to enter bankruptcy or applying for an IVA procedure. Also, debt consolidation simplifies your life and thereby allows you to focus on what is essential: Working on generating the income required to meet your obligations. It saves you important time and makes your life less complex. On the other hand, it goes without saying that simply turning your short-term debts into long-term ones is not a solution as such. This is why debt consolidation only makes sense if you are sincerely committed to paying off your debt.
Whether debt consolidation is a factor for the good at least partly depends on your choice of debt management company standing by your side to provide you with the right advice.