What Is Debt Consolidation?

What is debt consolidation? very simple, as the name implies, it is putting all your debt together by borrowing from one source to pay other debt and you end up with debt from only one source. So why do people do that? Very simple, it is to secure a lower interest.

Many creditor have different interest, some lower and some higher. Why would want to pay more when you can pay less interest? So debt consolidation is all about borrowing from the person with the least interest to pay back those with high interest. At the end of the day, you will end up owning the creditor with the least interest you can ever find. The benefit? You get to clear your debt earlier.

BUT BUT BUT! There is always a problem with debt consolidation. The problem is, you have not yet SOLVED your debt woes! Nobody can clear their debt by borrowing from one to payback another... And if you keep doing it, the consequences are dire! Do you realise that everytime you take up a loan, you will incur an interest? so imagine if you keep borrowing from many creditor, you will keep incuring interest! so instead of clearing your debt, your are getting deeper into debt.

Debt consolidation is alright if you keep it to a single transaction. You may end up paying interest when start to borrow again but at least this method will keep you safe from those high interest. And also, it help you to keep track of your debt problems when you only have one creditor to account for.

In a nutshell, debt consolidation is perhaps should be your first step in your journey to clearing debt but never the 2nd or the 3rd. Just do it once and consolidate your debt into one creditor with the least interest and stay put that way. The benefits? You pay lesser interest and help you keep track with your debt problems.