Pros and Cons of Debt Consolidation
 | When struggling with medical bills, one possible solution is debt consolidation - the process of combining several loans or debts into one single loan with one (usually smaller) monthly payment. Yet, while making a fresh start with a new loan may sound appealing, there are both pros and cons to taking this approach. The Advantages of Consolidating Debt There are several advantages to consolidating debt. First, a number of different loans can typically be paid off, making the new repayment of just one single loan more convenient. Oftentimes, the interest rate on a consolidation loan can be lower than the rate on the loans that are being paid off, which can help in making the total monthly payment smaller. In addition, the borrower's new payment may also decrease in comparison to what they were previously paying because the new consolidation loan may have a longer repayment term. This lower payment can help a borrower have an easier time making their payments, and therefore avoiding late fees and other penalties - as well as negative marks on one's credit report - that may otherwise result. Factors to Consider Before Moving Forward with Debt Consolidation Although there are many good reasons to consider debt consolidation, there are some factors to consider prior to moving forward. For example, while a lower monthly payment may help to ease the amount of overall monthly payment that is due, a longer loan term can mean you will be saddled with the debt balance for a longer period of time. It is also important to determine whether or not there will be any additional fees for taking on the consolidation loan. In this case, be sure to read all of the fine print on the loan paperwork in order to ensure that there are no hidden surprises such as balance transfer or application fees. Taking the Next Step In order to determine whether debt consolidation is right for you, there are some important steps to take. These include: · Compare the interest rates on your current loans with that of a potential new consolidation loan. If the rates are the same - or if the consolidation loan has a higher interest rate - the new loan may ultimately end up costing your more money in the long run.
· Add up the total amount that you will pay on your loans in your current situation and compare the total to the amount you will have paid on the consolidation loan. If the total amount on the new loan is more, then it may make more sense to stick it out and pay off your current debt balances. If, however, the total amount is less, then it makes sense to move forward in consolidating your debts into one single consolidation loan. For more information on how you can get help with your medical debt, visit Navidebt.org, a non-profit organization. |
History
Navidebt is designed to provide educational resources to those who are burdened with medical debt. The information offered on Navidebt’s website can help consumers in better understanding their rights.
The Navidebt service is an affiliate offering of the Chronic Disease Fund, a 501(c)3 non-profit organization that focuses on patient advocacy.
