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Debt Relief – Insolvency – Bankruptcy Information » Debt Consolidation and Refinancing » What are the disadvantages of getting Debt consolidation?

What are the disadvantages of getting Debt consolidation?

I m is about to take debt consolidation. I know the advantages of it but i want to know the risk too of it . Please tell me your experience also it will plus point for me


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3 Responses to "What are the disadvantages of getting Debt consolidation?"

  1. Judy says:
    Get Into More Debt. It may be tempting to continue to use the credit cards that you’ve paid off. This is one of the reasons why debt consolidation is not a cure for credit problems. In fact, it could actually make problems worse, by allowing a person to get into more debt than they started with.

    May Cost More Overall. Even though the monthly payments and interest rate might be lower, you can end up with a longer-term loan in which you end up paying more interest in the long run.

    May Take Longer to Pay Off. If you don’t end up using the extra monthly savings to pay off your loan (and perhaps even if you do), it could take you longer to get out of debt.

    Could Lose Your Home. If you go the route of a home equity loan, the lower interest rate that comes from listing your home as security might not be that beneficial if you default on your loan and lose your home.

    One Payment. In some cases, it can be beneficial to pay off smaller loans with higher-interest rates first. You don’t have that option if you’ve lumped all your debt into a single loan.
    May not Qualify for a Loan. It’s possible that with so much debt, you may not qualify for an additional loan. Or, if you do qualify, the interest rate might be high.

    Disreputable Debt Consolidation Companies. Not all non-profit debt consolidation services are looking out for your best interests. Make sure you read Debt help that isn’t – some companies may be downright scams.

  2. Ryan M says:
    1) Your credit will be ruined for 7 years.
    2) Many of these companies are scams.
    3) Many will do more harm than good for you.
    4) Might require an “up-front’ fee to work on your case
    5) No guarantee that they will be able help you at all.
  3. Sam says:
    It not only depends on the bank that is offering the new loan, but also the type of old loans. If you are consolidating a bunch of old student loans for a lower interest rate loan with a similar duration, then the cons are extremely different than taking out a home equity loan to pay off credit card debt. If you want to re-post with additional detail, I’m sure people here can help you more.

    Some generic things to consider:
    1) Refinancing fees
    2) Lost benefits of old loans (i.e. government-sponsored student debt, unsecured credit cards)
    3) Longer duration of new loan
    4) Other loan terms that may be different (i.e. adjustable rate)

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