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Debt Consolidation advice

Debt consolidation refers to merging all your debs into one in order to pay off your debt faster and at a lower cost. In order to carry out this you need to obtain the services of a debt consolidation agency who will act on your behalf, and also give your proper debt consolidation advice


1. Only one payment – you will no longer have to spend time going through each of your bills analyzing interest rates and terms and deciding how much to pay and to whom. Under consolidation you need to make just one payment each month to the agency and they take care of the rest.

2. The principle amount of your debt is paid faster – creditors offer reduced interest rates under debt consolidation. Therefore the payments you make go towards paying off more of the actual debt then the accrued interest and hence your debt reduces faster.

3. Your credit score will be restored – your account will be “re-aged” by the creditors meaning all your outstanding debt is written off and the account becomes “current”.

4. No late fees, over limit fees – once the consolidation scheme is put into action, the creditors will offer to cancel late payment fees and over limit fees from your account.

5. Give you a more relaxed mental state – you will no longer have creditors harassing you for payments as the consolidation agency will deal with your creditors exclusively.

6. Tax deductions – the costs of the consolidation scheme may grant you tax relief which can be set off against your secured debt payments.


1. Encourage bad spending habits – since the scheme pays off your unsecured debt faster but uses up your savings in the process, it may take more time to pay off your secured debt. This means your savings in the long term will be reduced.

2. Getting out of debt becomes too easy – once you get into a consolidation scheme, you don’t need to worry about budgeting and planning for the future. It may give you a false sense of security that might put you in a more serious position in future.

3. There might be a simpler solution – if you don’t have a lot of credit cards, transferring your higher rate cards to the lower rate one would be the more sensible option than going through a consolidation scheme.

Article Summary - Although debt consolidation is a good option if the diverse interest rates and sheer number of separate payments are making you lag behind on your debt repayment, you need to carefully consider the positive and negative aspects of such a scheme.

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